TRADE of the MONTH
Despite its problems, KAP has strong growth potential
KAP is a clear winner in the performance stakes, outdoing Barloworld. But in the rating stakes KAP, which has been trading under the shadow of its disgraced major shareholder, Steinhoff, is lagging well behind Barloworld. Steinhoff, locked in a fight for survival, made its first move in March, reducing its holding in KAP from 43% to 26% in a private placing worth R3.67bn. Nadim Mohammed of First Avenue Investment Management says: "I believe Steinhoff will sell its KAP stake completely through further placement tranches. That’s what it did with its PSG stake." KAP has already distanced itself from Steinhoff with moves that include the termination of mutual corporate services and the vacation of rental space in Steinhoff’s head office. With Steinhoff’s woes as they affect KAP now being resolved, it appears to have created an opportunity to go long on KAP and short on Barloworld. Performance figures speak for themselves. In its five years to September Barloworld produced average annual...
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