Allied Electronics Corp., the South African stock which ended a six-week losing streak, can sustain gains provided it pulls off a reorganization, according to Avior Capital Markets.
The company, known as Altron, with interests from electronics to power cables, is in talks to sell its mobile-phone subscription base as part to get rid of loss-making units and streamline operations. Craig Venter, whose father Bill founded Altron in 1965, will step down as chief executive officer at the end of this month to allow the company to move to an independent management structure from a family owned business.
“They’re writing off a lot of business; there’s a lot of upside, but it comes with a lot of risk,” Roelof Brand, an analyst at Avior, said by phone from Cape Town. “They’re restructuring the management structures, getting some fresh faces in, so hopefully that will reinvigorate them.”
The company’s ordinary shares rose 15 percent on June 30, the biggest one-day gain since March 2009. Altron was unchanged at 12.60 rand by 1 p.m. in Johannesburg, valuing the company at 4.4 billion rand ($360 million).
The stock has declined 24 percent this year, reaching an 11-year low on June 29, the same day Altron’s 14-day relative strength index fell to 18, below the 30 level that some analysts use as indicator for when a stock is oversold.
“There’s enough potential for them to get it right,” said Brand, who has held an outperform rating on the stock since October, according to data compiled by Bloomberg. “It’s a risky outperform. The conviction levels for it aren’t really that high.”