Brait pins hopes on infrastructure drive

Commenting on Brait's growth strategy following the release of the group's interim results to end-March, CEO Anthony Ball said it sees opportunities in government's mooted R846bn infrastructure drive.

During the period under review, headline earnings increased by 11% to R185.6m while assets under management dropped from R14.1bn to R13.6bn. Dividend per share was up 0.4% to 179.54 cents.

"The board believes that dividend distributions are an important part of long-term shareholders' wealth creation and an indication of the health of the group," said Ball.

Another key metric for shareholders looking at investing in Brait is the return on equity [ROE] figure which came in at 13%, up from 11% the previous financial year. The company has a stated long-term average of 25% ROE but as Ball points out, investors had been cautioned that trading in 2009 and 2010 would see lower returns.

A thorny issue in Brait's investment portfolio is its 24.8% holding in opencast mining contractor Buildmax.

Buildmax is seeking to undergo a rights issue - of which Brait has already offered to underwrite R150m - to re-establish its capital base.

Shares in Buildmax have fallen from recent highs of 120c a share to trade at just 32c, following an assortment of operating issues. This has weighed on Brait’s valuation, but has not had a negative impact on listed value; at 2 100c per share Brait trades at a significant premium to its net asset value of 1 302c.

Brait was a popular choice with asset managers during the first quarter of 2010, with fund managers buying nearly two million shares over this period.

With Brait’s private equity portfolios retaining their focus on cash retailers and infrastructure spend, they would be natural beneficiaries of a rebound in growth.

Investors may also take heart from comments by André Roux, head of fixed income investment at Investec Asset Management, following the release of gross domestic product (GDP) figures on Tuesday. Roux said the recovery appears to be widespread, encompassing an improvement in trade and consumer spend.

"The overall level of GDP is now within a whisker of the high point we reached in September 2008, which would have seemed a very unlikely outcome this time last year," said Roux.

"Most analysts are likely to be revising their forecast numbers upwards and an overall growth number of 3.5% for the year now seems like a realistic rather than an optimistic expectation."  

 - Fin24.com