Cape Town - Remgro, which has built much of its fortune on so-called sin sectors, has increased its exposure to liquor giant Distell only months after unbundling its tobacco interests held in British American Tobacco (BAT).
According to results for the year to end March, Remgro spent R259m buying four million KWV Investments Limited shares. KWV Investments is a holding company that owns a significant stake in listed liquor giant, Distell.
The acquisition means that Remgro bumps up its indirect stake in Distell from 29.2% to 32%.
Remgro CEO Thys Visser said Distell was a good asset and that the KWV Investment shares represented good value at the time of purchase.
Distell is a near perfect Remgro investment - fitting all the group's investment criteria with well known brands, reliable cash flow, a significant global presence and strong management.
The other major shareholders in Distell are unlisted liquor group KWV Limited (which will soon unbundle its stake in Distell into a new investment vehicle) and brewing giant SABMiller.
While Visser played down Remgro's KWV Investments share purchase, the transaction does fortify Remgro's position as the dominant shareholder in Distell.
In spite of the sizeable KWV transaction (as well as an addition al $11m investment in technology group Xiacom), Remgro finished the year with a hefty R5.9bn in cash.
Remgro's cash pile represents around 11% of the last stated intrinsic value of 9 915c/share.
Visser said Remgro had no firm plans to spend its cash pile, and reckoned it was prudent - under prevailing conditions - to be building up cash.
Remgro's intrinsic value - the most important measure of Remgro's performance was reflected as R101.12/share as at last Friday.
That means Remgro's shares - last traded at around 7100c on Monday - are trading at a discount of nearly 30% to the group's underlying value. Remgro has traditionally traded at a discount of between 15% to 20%.
During the year Remgro did make impairment provisions of R438m on three investments - automotive engineering group Dorbyl, diamond miner Trans Hex and safety glass manufacturer PGSI.
The biggest value smack for Remgro was in Impala Platinum, where the group's 26.7m shares almost halved in value from R8.3bn to R4.2bn.
Other big drops in Remgro's portfolio were seen in FirstRand/RMB (R15bn to R12bn), Kagiso Trust Investments (R1.4bn to R955m), Total SA (R2.6bn to R1.1bn) and Nampak (R1.3bn to R984m).
But household brands business Unilever saw a marked improvement in value R3,6bn to R4,1bn, while Remgros stake in private hospitals group Medi-Clinic's value grew from R5bn to R5.5bn. Suger group TSB saw its value increase from R2.1bn to R2.6bn.
Remgro's investments in liquor group Distell, Rainbow Chickens and gases group Air Products all held their value.
Remgro's cash flow from its underlying investments investments was reassuringly strong, coming in at R1.1bn. Adding in dividends received of R1.5bn meant that Remgro's cash available from operating activities (after tax) was over R2.3bn.
Remgro declared a final dividend of 110c/share, bringing the full year payout to 190c/share.
Visser pointed out that for Remgro shareholders still holding shares in BAT as well as Reinet depository receipts, the collective payout was around 8% higher than last year.
Visser was not bale to comment on Remgro's recent proposals to acquire corporate cousin Venfin in a share swop deal. He said an announcement in this regard would be made in the next day or two.
- Fin24.com