Our opinion on the current state of STEFSTOCK(SSK)

Stefanutti (SSK) is a South African construction company offering services in roads and earthworks, marine construction, concrete structures, bulk pipelines, piling, geotechnical services, open pit contract mining, affordable housing, mine residue disposal, and other areas. It operates in sub-Saharan Africa and the United Arab Emirates (UAE). The company is considering further downsizing to match its falling order book, which 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 follow 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 year to 29th February 2024, the company reported revenue up 17% and a headline loss per share of 55.73c compared with a loss of 38.73c in the previous period. The company said, "...at 29 February 2024 the group's current liabilities exceeded its current assets by R1,136 million (Feb 2023: R1,141 million), and the group's total liabilities exceed its total assets by R52 million (Feb 2023: R66 million)." The company's shares have become a "penny stock" and it remains a highly risky loss-making business.