South African tech group Dimension Data, once the market’s darling, hit its lowest level in nearly seven years on Monday as tumbling offshore bourses and perceptions of a share overhang weighed, analysts said.
Didata dived more than 10% in Johannesburg to 350 cents, before finding some support to limit its losses to 4,1% at 375 cents by 1300 GMT. It underperformed a 1,4% fall in the overall market.
In London, Didata was six percent down at 23 pence, while European tech stocks were three percent lower.
”It’s more than the global malaise, it’s also a technical issue that there is a scrip overhang in the market as some big shareholders — like Nedcor — have signalled their intention to sell,” said one analyst.
Nedcor holds some 103 million shares in Didata — or about eight percent of the group. Last year before Didata’s shares started sliding, Nedcor had planned to sell some of its stake. But that plan was then put on ice.
Another analyst blamed Didata’s weakness on soft global markets; the nearing of the firm’s year end in September; nervousness ahead of supplier Cisco Systems’ results and more competition from big rival IBM Global Services.
Last week International Business Machines (IBM) bought PriceWaterhouseCoopers Consulting for $3,5-billion, boosting its competitive edge.
And Cisco, a bellwether of IT market mood, releases is fourth-quarter results after the market closes on Tuesday.
”It’s falling in a bit of a vacuum right now,” the first analyst said, adding that the stock had broken through levels where most would have previously called a floor. ”Tangible net asset value is around 300 cents, but valuations on other metrics are of five to R10.”
Analysts said on a valuation basis the share was looking cheap, but sentiment continued to be shaky. The stock’s fall had also moved it off some offshore fund managers’ radars, they added.
Didata has lost more than 95% of its value since its peaks above R70 in September 2000. – Reuters