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Company Overview:
Eoh is Africa's largest information and communication technology company which consists of a mix of highly innovative intellectual property businesses and has a market capitalization of about R2.48B (as of 13 November 2019.
Problems:
- 90% drop in share price from 2016 to recently due to allegations of a fraud scandal involving its employees and the public risk
- Losing being the Microsoft (NASDAQ:MSFT) licensing solution provider to their Competitor Altron (I think Altron is eating up Eoh (JO:EOHJ) market share)
- Forced sale of shares by financial institutions against equity financed transactions to various individual shareholders i.e shares were used as collateral for financial loans from financial institutions so basically they have a debt problem which they currently solving by selling off some of their assets
Technical analysis
This stock has been ranging between 1400c and 1645c which are both prices of significance and have shown a bullish and bearish momentum respectively. As of 13 November 2019 14:14 p.m the price of the stock was at 1404c which is a bullish significant zone to support the bullish take is the inverted pin bar/ inverted hammer that formed on yesterdays close i.e 12 November 2019 close to show the buyers stepping in. as a result as per the attached screenshot, there is a potential opportunity of upside on the stock.
Qualitative analysis
The company strategy in my opinion is one of the things that could make the company to recover, with the public sector becoming high risk to do business with due to corruption I'd assume having had first-hand experience Eoh would have to reduce public sector work or come up with a risk assessment model to accept client work in the public sector specifically. Any company's share price is based on perception and any news or sens is likely to course a reaction to the stock price but the extent of the reaction depends on the type of shareholders the company has, a tech company is a volatile stock at times but technology on its own is forever changing as a result providing room for high growth for tech companies that's what makes tech stocks more of value per share company than a dividend based.
Since a restructuring plan of Eoh is currently in the plans although the non-executive directors are said to be demanding an increase in remuneration of which is justified given the complexity of strategy and effort they now have to put in to recover the company I still think there is room for growth given the industry the company is operating in, obviously time is the only hold up here given that the company is stuck with whatever subsidiaries they have now and purchasing more could increase risk given their debt levels and I'd think now what is core would be managing operations and paying back their debts before coming up with an expansion strategy.
Opinion
Given the above considerations, I'd buy EOH at any price around 1400c in hope to exit at 1600c since I am a speculator, this is subject to a restructuring plan by management or any plans to bring back growth in the company
