SHAREHOLDER activist Theo Botha may have inadvertently extracted a pointer as to new-look Remgro's future strategy at the company's annual general meeting (AGM) in Stellenbosch on Monday.
The AGM was held on the same day as general meetings for Remgro and its corporate cousin Venfin, which successfully sought shareholder approval for their merger.
Botha asked Remgro chairperson Johann Rupert what the way forward was in terms of the group's under-performing investments in engineering group Dorbyl and diamond miner Trans Hex.
Botha noted that Remgro had two executive directors on the Dorbyl board and two executives and one non-executive director on the Trans Hex board - a rather heavy presence for investments that carry values of less than R50m each.
Rupert responded frankly, arguing that most people spend too much time (because of reputational risk) on smaller investments. "One has to enforce self-discipline to focus on big things than can make difference."
Dorbyl, as we know, is in the process of being wound-down. The same fate probably does not await Trans Hex, which - Remgro CEO Thys Visser pointed out - still has positive cash flows.
But if there is a push in new-look Remgro to pursue "bigger things" I wonder what will become of some of Remgro's (and I use this term guardedly) "more marginal" investments in listed companies.
Not a sexy investment
For instance, Remgro has clung onto a minuscule stake in publishing group Caxton. While Rupert says he likes Caxton ("Terry Moolman runs a fantastic show"), there is no intention for Remgro to get involved in "opinion leading media".
So the Caxton stake sits buried in Remgro's formidable portfolio, chipping in a couple of million rands' profit (pretty much like emptying your golf sandbag in the Sahara).
Looking at things slightly more substantial, I wonder what Remgro is pondering around its strategic 12% stake in listed packaging group Nampak.
Nampak's value on the JSE has crimped over the last two years, and certainly is not ranked as one of Remgro's sexiest investments. Even if Nampak does recover strongly - which is not far-fetched under the astute leadership of Andrew Marshall - in the next few years, will the investment have an impact on dividend flows and underlying value?
Here I think Remgro needs to bulk up to a more meaningful stake, or sell out. But Remgro never does things in a hurry, which can have its rewards (remember Rainbow's prolonged recovery) and its downside (the fizzling of Sage and Dorbyl).
Remgro, which now has some capital-hungry Venfin projects to look after, also does not need to stuff around with mediocre investments.
Frankly, I don't think too many Remgro shareholders will miss passive investments in listed companies like Dorbyl, Trans Hex and Nampak. There may be differing opinions, however, over Remgro's small (but valuable) stake in Impala Platinum.
With Rupert talking about self-discipline to focus on big things, my hope would be that Remgro intends to pursue its listed investments where it already has considerable sway.
Exciting plus reliable equals happy shareholders
Here I am talking about investments in private hospitals group Medi-Clinic, liquor group Distell and broiler producer Rainbow. And my contention is that Remgro (as it previously attempted with Rainbow) should make an offer to minorities and delist these companies.
I would mention RMB/FirstRand here as well, but I keep hearing talk that sooner or later a large international financial services player will come a-calling with a buy-out/strategic buy-in offer; that situation may take care of itself.
I think it would make Remgro a far more attractive investment proposition if it held only - or mainly - stakes in unlisted companies. That would make Remgro the only port of entry not only for companies like Medi-Clinic, Rainbow and Distell, but also to an array of solid unlisted companies like Unilever SA, TSB Sugar, e-TV, Tracker, Air Products, Kagiso Trust Investments and Seacom.
Somehow, I think the traditional discount the market places on Remgro would narrow significantly if the company offered "big" plays on both exciting and reliable investments not readily available on the market (or elsewhere).
As a faithful shareholder, I live in hope of big things...
- Fin24.com