MGX is still rated as a buy, says an analyst, despite the acrimony between it and black empowerment company Motswedi.
IT analyst Marlene Heymans of Vantage Investment Solutions says while the split between MGX and black empowerment partner Motswedi is "very sad", she believes analysts (herself included) will not downgrade the valuation or recommendation on the MGX share price.
This doesn`t bode well for black empowerment deals in the future either. AST is still struggling to find a black empowerment partner, CS Holdings is also looking and Comparex lost theirs. So all in all, it doesn`t look good.
Marlene Heymans, analyst, Vantage Investment Solutions
"The whole split is very sad, especially from the point of view that it leaves very few black economic empowerment partnerships in IT," says Heymans.
"However, I don`t believe the split will have an impact on MGX`s earnings, and while future government contracts may be a bit slower in coming, the fundamentals at the company [MGX] haven`t changed."
Heymans was commenting on Motswedi`s announcement that it had severed all ties with MGX after three years, and MGX`s subsequent denial that Motswedi had bought back its 19% shareholding in the black empowerment company.
"The bottom line is that these companies have obviously not signed the same documents," says Heymans.
"The only thing we can expect is for the matter to drag on in a protracted court case."
According to the analyst, the repercussions will not stop at MGX and Motswedi. "This doesn`t bode well for black empowerment deals in the future either. AST is still struggling to find a black empowerment partner, CS Holdings is also looking and Comparex lost theirs. So all in all, it doesn`t look good."
However, Heymans says she values the MGX share at 1350c, while the share was trading at 1070c at midmorning today. She also holds on to her recommendation - buy.
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