Ayo Technologies: The numbers don’t add up
There is a complete mismatch between the tech firm’s valuation and the value of its parent company’s share price
The market will be scratching for an appropriate value for Ayo Technology Solutions after the recently listed counter announced a services contract with energy giant Sasol this week.
Ayo was spun out of African Equity Empowerment Investments (AEEI) and listed on the JSE late last year following a private placement that raised more than R4bn in fresh capital.
The initial market capitalisation for Ayo was almost R15bn. But this value has crumbled to less than R10bn, with recent interim results not dispelling market contentions that the prelisting share placement — which was supported by the Public Investment Corp — was optimistically pitched.
The announcement of the Sasol deal was short on detail: the official press release says Ayo will deliver and manage a set of global network, communications and security services. The FM understands the deal could be worth R2bn.
The prevailing market value of Ayo, a highly illiquid stock, remains contentious.
Based on the share price at the time of writing, Ayo carries a market value of R9.8bn. But that value is not reflected in the share price of AEEI, which retains a 49% stake in Ayo.
AEEI’s share of the company is, on paper, worth R4.9bn. But AEEI’s market capitalisation is reflected as only R2.7bn — an astounding discrepancy in value.
The AEEI share price suggests the "real" value of Ayo is considerably less than the technology group’s market value.
AEEI also holds a 55% stake in Premier Fishing & Brands — which is worth about R550m — and has a pending cash pile of about R1bn, thanks to the recent sale of a 30% stake in British Telecoms SA to Ayo. AEEI also has strategic investments in unlisted Saab SA and biotechnology group Genius, as well as significant minority positions in listed investments Pioneer Foods and asset manager Sygnia.
On a conservative estimate, AEEI’s cash and investments — excluding Ayo — carry a valuation of about R2.2bn. That suggests the market is valuing AEEI’s controlling stake in Ayo at about R700m.
This infers a "real" value of less than R1.5bn for Ayo — which is about a sixth of the tech company’s current market capitalisation.