Where to for DiData`s share?

By Iain Scott for Dimension Data South Africa

Johannesburg, 25 Nov 2002

Last month the Dimension Data share was trading at levels which essentially priced the group for bankruptcy, but its latest set of results put those fears to bed.

The share plunged after DiData warned in August that its margins were under pressure. Last month it reached its lowest close at 250c.

In the past few weeks the share has closed at between 380c and 450c. It was trading at 383c this morning, down 9c from Friday.

The full-year results were generally in line with analysts` expectations, and market observers say the share price is likely to remain at current levels for the next six months, until the group releases its next interim results.

"I don`t see the share moving on any business fundamentals at DiData," one analyst says. "But any move is going to come not from business fundamentals but rather from corporate action or trends on Nasdaq."

Survival instinct

Another analyst says the group`s management has not sat back in the slump, but has taken action to deal with it. He says DiData has squashed the rumours of bankruptcy.

"They`ve restructured management, they`ve implemented the 'DD Way` business plan, they`ve cut back on staff and they`ve addressed the issue of costs.

"Then there`s also the VenFin bond. You can argue about who is the real winner with the bond issue, but basically it says to me that management is doing something about the slump and they intend to survive."

DiData recently issued a $100 million seven-year convertible bond to which VenFin subscribed in full.

"DiData`s industry is under pressure," another analyst comments. "Opinion has been divided, but I think basically the group is showing that it`s aware of the pressure and wants to make sure it has cash available if the market hits another slump."

Analysts say the market is waiting to see how long it takes for the group`s strategy to have a real effect. Until then, and bar any unforeseen news from the US exchanges, the share is unlikely to see any major movement for the next six months.