Chris Logan - Tongaat's turnaround tale turns sour

Tongaat’s results were highly anticipated given it announced a proposed rights issue only weeks ago. Tongaat also issued earnings guidance with suggested large losses owing to operational mishaps that have since been dealt with. Despite this, the share price has lost more ground, down as much as 15% intraday. The size of the rights issue, which is going to be in the region of R4bn, will be around four times the size of the current business. The capital raise will be extremely dilutive and may provide an opportunity for new investors once the dust settles. Opportune Investments founder Chris Logan – one of the few analysts on the JSE who covers Tongaat in any detail following their accounting irregularities – said that results did not paint a pretty picture. The operational issues have supposedly been sorted out and have cost the sugar refiner hundreds of millions in lost sales. Tongaat’s land, valued at billions of rands on its books, cannot entice buyers. It has been a recurring issue over the last few years and puts in question whether the value attributed to the land on Tongaat’s books is an accurate reflection of the market value. Learn more about your ad choices. Visit megaphone.fm/adchoices