JSE to get to the bottom of Tourvest overstatement
JSE to get to the bottom of Tourvest overstatement
August 15, 2005
By Ingrid Salgado
Cape Town - The JSE is investigating the circumstances of a faulty trading statement issued by Tourvest that inflated the tourism group`s earnings forecast and caused its share price to surge on Friday before trading was halted.
Tourvest, in a statement issued on Thursday evening, said headline earnings a share were expected to rise by between 180 percent and 200 percent for the year to June. Early the next day, the news pushed its share price up as much as 8.2 percent to a yearly high of R1.70.
The forecast, however, was out by a huge margin.
The error was spotted, but not before an unusually large number of Tourvest shares traded hands - about 1.5 million shares worth about R2.5 million.
The JSE halted trading at 10.40am for four and a half hours until a corrected statement had been issued by Tourvest, said JSE listings director John Burke.
The updated statement acknowledged that the first forecast had been `badly worded` and should have stated that headline earnings were expected to increase by between 80 percent and 100 percent to between 10.7c and 11.9c a share.
Burke said a thorough investigation would ensue. He was not able to say whether the JSE would consider reversing the early morning transactions, or whether Tourvest and its management would be sanctioned or fined.
Tourvest`s chief executive, Tommy Edmond, said the group would look at ways to minimise the consequences of the incorrect statement for shareholders.
This could include an offer to buy back the shares, he said. The group would put in place procedures to ensure that a similar mistake did not recur.
Burke was not yet aware of any complaints lodged on behalf of shareholders. Asked whether the JSE should have checked the accuracy of the original Tourvest statement, Burke said it was `definitely not our responsibility`.
Sean Ashton, an analyst at Nedcor Securities, said that given an expected flat operational performance at Tourvest due to rand strength, the first trading statement had come as a huge surprise. `It was a bit of an oversight,` Ashton said drily.
Pallavi Ambekar, an investment analyst at Coronation Fund Managers, believed the mistake was an honest one.
Tourvest`s second earnings forecast was more in line with both analysts` forecasts.
Ashton said the expected rise in profit of up to 100 percent came on the back of a lower secondary tax on companies charge of R38 million in 2005.
Tourvest shares closed 2c higher at R1.58 on Friday while the leisure and hotels sector lost 0.9 percent.
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