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Cape Town - Imara SP Reid, a stockbrokerage, has urged investors to take advantage of the sizeable discount to net asset value (NAV) at which industrial conglomerate Remgro [JSE:REM] was trading, adding that buying the share was "a no-brainer".
In a note to clients, Steve Meintjies, head of research at Imara SP Reid, wrote that adjustments to Remgro's calculation of its end-September intrinsic NAV illustrated that Remgro share price was offering a larger-than-usual discount.
NAV represents total company assets after taking into account its liabilities.
Meintjies estimated Remgro's NAV at R121.49 per share share compared to the "official" NAV of R110.54/share as of end-September 2009.
The estimate takes into consideration changes in the price of Remgro's listed investments since the end of September as well as the inclusion of the portfolio originally housed under Venfin, which was merged into Remgro late last year.
Imara SP Reid's estimated intrinsic value of R121,49c means Remgro's shares were offering a discount of around 27%. This was markedly higher than the traditional 10% to 15% discount applied to investment companies, it said.
Even if the Venfin price, settled by Remgro [JSE:REM] issuing 41.6 million new shares at 8 925c/share, included a "takeover premium" of 20%, the discount would still be around 26%, Meintjies said.
"This (discount) is at the upper end of the range and we would suggest a discount of between 10% and 15% to be more appropriate," he said.
The discount was not owing to the quality of assets, but to the long-standing business model of the family-owned company.
"For a start, this does not fit the mandate of many an offshore fund manager nor, for that matter, some local institutions," said Meintjes.
"In addition, fund managers and analysts may resent the fact that management seems impervious to their ideas as to how the company should be run and this has, as we have said before, led to some caustic comments about investment strategy."
*The writer holds shares in Remgro
- Fin24.com
