Our opinion on the current state of AEE

12 gru 2023

This is a black-owned investment holding company which is itself a subsidiary of Sekunjalo, a company controlled by Iqbal Surve and his family. Surve is a medical doctor who had very strong political contacts with various ANC stalwarts in the Zuma era. AEEI has spun off and separately listed AYO as a technology company but still holds 49,4%. This listing was controversial because the Public Investment Corporation (PIC) bought 99,8m shares for R43 each by way of a private placement. The total value was R4.3bn paid by the government pension fund. The company's net asset value (NAV) was just 15c per share at the time according to its pre-listing statement. The previous CFO and CEO have testified that the profits of AYO were manipulated and overstated. Then Surve tried to list a company he called Sagarmatha which included Surve's online shopping and media businesses. Fortunately, the listing had to be aborted due to a JSE technicality, but the coverage it received has generally left a bad taste in investors' mouths. AEEI made a high of 770c in January 2018 but has since slumped to just 120c and looks to fall further. The share is also very thinly traded with an average of only R26 000 worth of shares changing hands each day. Our advice to private investors is to stay away. In October 2019, the Financial Sector Conduct Authority (FSCA) conducted a raid on Surve's offices as part of an on-going investigation. On 1st June 2021 British Telecom (BT) announced that it was severing ties with Sekunjalo due to "misrepresentation of facts" before the standing committee on finance in parliament. In its results for the six months to 28th February 2022 the company reported revenue down by 8,92% and a headline loss per share of 14,05c compared with a loss of 6,64c in the previous period. We would regard this as a very speculative investment for private investors because there is insufficient information about what Surve is really doing and the outcome of the PIC's efforts to get its money back from AYO. We (and many other analysts) feel that reliance cannot be placed on these numbers. Independent analyst Anthony Clark has said in the past that its results were "astonishing in their bravado". In its results for the six months to 28th February 2023 the company reported revenue from continuing operations up 22% and a headline loss per share of 2821c compared with a loss of 100c in the previous year. In a trading statement for the year to 31st August 2023 the company estimated that from continuing operations it would make between a headline profit of 0,5c per share and a headline loss of 0,08c per share compared with a profit of 2,93c in the previous year.