Shares in Telkom traded at R28.17 on Friday, seemingly putting the stock on track to triple the value of its early May all-time low.
Telkom is now worth R14.7 billion, after its stock gained 1.33% or 37c on Friday, beating the broader market, which gained 0.69%. The stock is continuing its gains, which started in mid-May after it hit an all-time low of R11.96.
Its upward movements have been aided by several factors, including the settlement of long-outstanding disputes with the Competition Commission, a R12 billion write-down of legacy assets (which was seen as a reality check by some commentators), and the promise of a turnaround strategy to be revealed in November.
Its movement was also aided by an improvement at core operating profit level. Government owns around 50% of Telkom, directly and indirectly.
Buying in
Its top brass have also indicated their faith in the company, with several directors buying shares worth millions. Earlier this month, CFO Jacques Schindeh"utte bought shares in the company worth almost R6 million.
Schindeh"utte bought 243 700 in stock, at a price of R24.45 a share. This purchase came just eight days before Telkom announced that both basic and headline earnings per share would be at least 20% higher in the first half of the year.
Telkom points out that executives' share purchases are subject to strict governance, can only be made in specific time frames, and must be approved by the CEO and chairman. It points out that its current closed period falls between 1 October and 18 November, while Schindeh"utte's purchase was on 30 September.
The catalyst for Schindeh"utte's purchase was shareholder approvals at the recent annual general meeting, three days before he bought stock. The specific approval allows for financial assistance to be provided to executives so they can buy stock.
Telkom notes the improvement in its first half results was due to a competition fine in the previous year, foreign exchange gains and the revision of post-retirement benefits. "It should be clear to the reader that the improvement was not as a consequence of improved operational performance."
Schindeh"utte's purchase followed one in July, when he bought 55 000 shares - at an average price of R18.07 a share - investing R994 430 in the stock. This purchase came after one by CEO Sipho Maseko, who acquired 52 520 Telkom shares, worth R1 million, and chairman Jabu Mabuza's investment of almost R500 000 in the stock.
Low base
Telkom, which listed in March 2003, saw its stock hit an all-time low in early May after a series of negative events, including government binning a proposed offer from Korea-based KT Corporation that would have seen Telkom issue 20% more shares in return for a R3.3 billion injection.
Its stock was also affected by its results for the year to March 2012; trading updates; the resignation of its previous CEO, Nombulelo "Pinky" Moholi; and a R449 million Competition Tribunal fine, which it recently agreed to pay, after initially deciding to appeal.
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