Hello. I’m Alec Hogg and this is the Rational Perspective.
Last year, there were two big stories in the South African market. Of course, the one was the collapse of the oil price, but when it comes to individual shares, the other big story was Pinnacle Computers – a company that had been going for 21 years with an uninterrupted profit record. It had gone from three cents per share at one point, to over R25.00 per share – a stock that IT specialist Irnest Kaplan said was his pick. Then disaster hit.
In March last year, the South African Police Services took an allegation that Pinnacle had tried to bribe one of its officials. That knocked the share price sideways – a share price that had benefited over the years – from a higher than anticipated operating profit margin. The skeptics said ‘there must be something in the allegations. Where there’s smoke, there’s fire’. The skeptics said ‘now we know why Pinnacle’s making above-the-odds operating profits’.
The consequence of this though, was very different. Those allegations have been withdrawn. The gentleman who worked for the Police Services (who made them initially) has left. The director who was allegedly fingered there (Sam Tshivhase), who had been with Pinnacle since 2003, has been exonerated and continues to do his job.
Today, financial results were released by the company, which shows that its revenues, in fact, are rising rather than falling. It just shows that sometimes you need to be calm in a period of storm. What goes on with Pinnacle in the future will depend a whole lot on the product mix that they’re able to put together, whether they’re able to sell more of their new products, whether their acquisition of just under 35 percent of Datacentrix turns out to be inspired or a burden.
Right now, those fraud allegations are something, which is very much, of the past. Today’s investors, who have a long-term horizon and like the other things about the company, should bear that in mind.
This is Alec Hogg with the Rational Perspective.
