Our opinion on the current state of SSK

Stefanutti (SSK) is a South African construction company which offers roads and earthworks, marine construction, concrete structures, bulk pipelines, piling, geotechnical services, open pit contract mining, affordable housing, mine residue disposal, and other services. It operates in sub-Saharan Africa and the United Arab Emirates (UAE). The company is considering further down-sizing to match its falling order book, and this will mean retrenchments. The share price has fallen from its high of 2650c in November of 2007 to current levels around 56c. The company is not paying dividends. Construction is always a risky investment in South Africa. Much will depend on the progress of the South African economy and the availability of construction work from the government. This share is probably going to continue its long-term downward trend for the foreseeable future. We consider it to be a poor investment even as a speculation. In July 2020 Stefanutti was accused by Eskom of being overpaid R1bn for work done on Kusile - which the company denies. In a restructuring plan the company is selling non-core assets and plant and equipment and trying to obtain further funding of R430m to counter the impact of COVID-19. The company is engaging in a restructuring plan which involves the sale of non-core assets, securing additional short-term funding of R430m and cutting costs. The company is technically insolvent, and we think that this company may well be following many of its peers in the construction industry into consolidation or business rescue if the current restructuring does not work. In its results for the six months to 31st August 2023 the company reported contract revenue up 16% and a headline loss of 22,4c per share compared with a loss of 25,0c in the previous period. The company is trying to reduce debt by "...the sale of non-core assets - the sale of underutilised plant and equipment and the sale of identified operations". The company's shares have been rising recently as its negotiations to sell its 49% of Al Tayer Stocks (ATS) have progressed, but it remains highly risky.