Clive Peeters winning on the ASX, but this race is a long one

Analysis by Patrick Avenell

SYDNEY, NSW: Looking for a way to double your company’s share price? How about suspending trading and reporting an employee has done off with almost $20 million?

 In the three days since Clive Peeters re-entered the Australian Securities Exchange fray, the listed retail group has jumped 16.5 cents – that’s a whisker off 200 per cent of its pre-trading halt price.

Back on 31 July 2009, Clive Peeters company secretary Steven Rowarth wrote to the ASX requesting a trading halt so the group could investigate an “accounting discrepancy”. At that time, Clive Peeters had just closed for the day at 17 cents.

Twenty-five days later, and the full story had been revealed: a staff member had misappropriated $19.4 million worth of funds, and used the cash to buy property, cars and other assorted luxuries. On Tuesday this week, MD Greg Smith wrote to the ASX outlining the investigation’s progress, and indicating the group would be relisting that day.

Those who follow the consumer electronics or retail industries were intrigued: how would this much-maligned group fare during its first day back. Last November, when it was unknowingly coping with the embezzlement, Clive Peeters dropped to 6 cents. Now the group was facing its first trading day having been exposed to the piercing light of not just the trade mags, but also the general press and electronic media. The result has been breathtaking.

Straight out of the barrier, Clive Peeters jumped 8 cents in the first hour. It sat in the mid-20s for most of Tuesday, finally settling at 26 cents, or an almost 53 per cent improvement.

On Wednesday, the analysts predicted a correction, but it didn’t come. Another 6 cents was piled onto the Clive Peeters’ price, pushing the value up 23 per cent, to a 32 cent close.

It’s been a quieter day today, but a positively stable one, with the price improving 4.7 per cent to currently sit at 33.5 cents. All up, since being readmitted to the party, Clive Peeters has jumped 97 per cent, or 16.5 cents from its base of 17 cents.

With the $20 million embezzlement scandal now in the open, and MD Greg Smith should be praised for his cooperation with the news-hungry media, investors may now just be thinking that this loss, some of which is being recovered, is incidental, and one-off, and that the overall results the company has presented to the market are a direct result of one wayward employee, rather than an whole wayward company.

Managing Director Greg Smith is a known racing fan – he once told Current.com.au his dream is to own a Melbourne Cup winner. After this August, Smith would know better than most that retail is a stayers’ race, and that those first to pass the Flemington winners’ post don’t often greet the judge the second time around. But in this particular race, the Clive Peeters horse may have been boxed in early, but its share price is going up, the odds are coming down, and it might just be about to hit the straight.

Clive Peeters share price correct as of 3:00pm.

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