FANCY something with a full bodied value flavour, yet priced at a level that ensures enjoyment sans smatterings of guilt?
Well, then check out the share price for CapeVin Holdings, which was recently separated from KWV Holdings (formerly KWV Limited). This newly constituted unlisted company holds as its only asset a strategic minority stake in JSE-listed liquor producer Distell.
The share has dribbled down to 320c from around 415c in early August on its over-the-counter (OTC) market.
Admittedly Distell's shares - which provide the value underpin to CapeVin - have not been that spirited of late. But certainly the dip in CapeVin shares is much more than a sympathetic shimmy-down with Distell.
As things stand, Capevin holds via JSE-listed CapeVin Investments (formerly KWV Holdings) roughly 30m shares in Distell, which equates to a 14.95% stake.
At Monday's midday price of 6 400c, the CapeVin see-through holding in Distell was worth nearly R1.8bn.
At the same time CapeVin's 51% holding in CapeVin Investments - which has a stake in Distell as its only asset - was worth around R1.6n.
At Monday's midday price of 320c, CapeVin carried a market capitalisation of R1.43bn.
CapeVin is therefore trading at an 11% discount to its direct holding in CapeVin Holdings and a hefty 20% to its indirect holding in Distell.
Some market watchers may find it disappointing that several weeks after the creation of CapeVin Holdings - an exercise aimed at unlocking value for KWV Limited shareholders - the new entity has already stretched its discount on its underlying asset to 20%.
Questions asked
Questions may well be asked whether it would not have been better for the old KWV Limited to have unbundled its shares in the old KWV Investments (CapeVin Investments) to shareholders.
Of course, there are tax implications regarding unbundling exercises that may have curbed enthusiasm for such a move.
But the truth is that the combined value of the two separated parts of the old KWV Limited - KWV Holdings and CapeVin Holdings - doesn't markedly (if at all) exceed the value of the old KWV Limited. In other words, there has not been much value unlocking for shareholders - albeit at a very early junction.
But let's be practical about the CapeVin situation. In essence the unlisted share offers a cheap entry into Distell, which in turn holds some of the best known South African liquor brands (think: Fleur du Cap, Nederburg, Klipdrift, Savanna, Chateau Libertas, Tassenberg, Amarula etc).
Brands aside, Distell is a cash-generative company that's superbly managed in all aspects - but especially in brand building and cost containment.
As such CapeVin will be the recipient of some rather strong dividend flows from Distell (via CapeVin Holdings), which no doubt will be passed on in full to shareholders.
On a pure valuation basis, CapeVin - at levels close to 300c - looks superb value for money. But there is another matter, which could enhance shareholders' fortunes greatly over the longer term.
Currently Remgro (with a 31.5% stake) and SABMiller (with a 29.2% stake) are the major shareholders in Distell. Remgro has recently shown a willingness to build its stake in Distell (having snapped up additional shares in KWV Investments from KWV Limited).
Good odds
As such CapeVin sits with what one might term a kingmaker stake - holding enough shares for any party wanting to make a determined move on Distell to come knocking with an attractive offer.
One certainly does not need reminding that PSG-controlled Zeder Investments is the biggest single shareholder in CapeVin with 26%. PSG, as history will show, is never far away from opportunistic action?
If I were a betting man (and occasionally I am) a wager on Remgro and CapeVin Holdings coming to an "arrangement" might not be such a long shot.
Perhaps it's even significant that I noticed Remgro chair Johann Rupert is the guest speaker at a KWV Holdings function next month?
- Fin24.com
*The writer holds shares in Remgro and Zeder Investments