Downrating hammers Dimension Data share

By Iain Scott for Dimension Data South Africa
Johannesburg, 20 Sep 2001

The Dimension Data share has taken a hammering after a downrating by two investment banks.

By midmorning today it was trading at R9.41, down 55c or 5.52% from yesterday`s close.

The share, already labouring under the burden of the profit warning issued in July and the subsequent eviction from the FTSE 100, closed 85c down at R9.95 yesterday, following comments by Lehman Brothers and Goldman Sachs.

The share traded as low as R9.70 and as high as R11.10 during the day.

Lehman Brothers says it rates the DiData share at market underperform with a fair value of 60p to 70p.

The share closed at 79p on the London Stock Exchange yesterday.

Goldman Sachs cut its earnings per share forecast for the group`s 2002 financial year to $0.08. It had previously forecast $0.10 and had estimate $0.13 for 2001 financial year.

However, Goldman has maintained its rating of market performer for the DiData share.

The Dimension Data share has also been the victim of rumours over the past month, varying from talk about possible buyouts by larger-cap companies to speculation about job cuts.

The group announced in June that it had cut 100 jobs at its i-Commerce division, following previous cuts in April at its Auto-Mate division.

Although DiData chairman Jeremy Ord denied there would be any further layoffs, the market is awash with talk that cuts have continued.

The Dimension Data share, which closed as high as R61 in January this year, plunged in July after the group warned that its full-year operating margins would be one to two percentage points lower than at the interim stage.

This was the result of pricing pressure from competitors in the products business and the integration of US company Proxicom, which was acquired this year.