Our opinion on the current state of HUG

Huge (HUG) is a telecommunications, media, and software company. It has operations in South Africa, Mozambique, Namibia, Lesotho, Swaziland, Botswana, Zambia, and Zimbabwe. It has the following main operating subsidiaries - Huge Cellular (49%), Huge Networks (50,03%), Huge Technologies (100%), Huge Telecoms (100%), Huge Soho (49%), Huge Media (96%), Huge Messaging (100%) and Huge Mobile (100%). It is involved in payment connectivity - connecting payment terminals of merchants, ATMs, points of sale, telemetry applications, micro-lending, and medical script verification. In its results for the year to 28th February 2023 the company reported headline earnings per share (HEPS) of 46,38c compared to 58,81c in the previous period. The company's net asset value (NAV) was 943,85c per share. The company said, "With effect from 1 March 2021, the performance of Huge Group’s investment portfolio is measured with reference to the fair value of each of its investments". In a trading statement for the six months to 31st August 2023 the company estimated that HEPS would fall by between 52,61% and 64,45%. The company said, "The decrease in HEPS and EPS when comparing HY2024 with HY2023 is largely attributable to a R71 million fair value loss on the revaluation of investments held". Technically, the share produced a text-book triple top at around R10 and since then has been falling since then. At the current price of 210c, the share is on a multiple of 4,53. The average daily value traded is R12 400 which is insufficient even for a small investment. In our view, this share has definitely not yet attracted significant institutional interest and is still trying to establish itself in a competitive and fast-changing industry. It is profitable, but its earnings are volatile.