Cape Town - The intrinsic value for industrial conglomerate Remgro Limited - after the recent unbundling of British American Tobacco (BAT) and Reinet Investments - was set at 9 436c/share last Tuesday.
This was disclosed in a note in Remgro interim results to end-September, which were released late on Tuesday afternoon.
Last Tuesday Remgro shares were trading at under 7 000c on the JSE, implying a discount of over 25% on the intrinsic value.
While many market watchers expected a "tobacco-free" Remgro to see a widening of its discount to intrinsic value, the share kicked up almost 2% to 7 400c ahead of the publication of the interim results.
At Tuesday's closing price, Remgro's discount to the last stated intrinsic value narrowed to just over 21%.
But it's worth noting that Remgro was trading at a 16.4% discount to its intrinsic value at the end of September - some weeks ahead of the BAT and Reinet unbundling exercise.
The more than 20% discount to intrinsic value will provide ammunition to arguments that the new "smokeless" Remgro is not as compelling as the old vehicle.
Chairperson Johann Rupert recently told shareholders that he was not overly concerned with discounts to intrinsic value at Remgro. He suggested cash flow was a far more important indicator.
Corporate activist Theo Botha, however, believes Remgro is ripe for a break-up to unlock value. "It's a dinosaur... Remgro should follow through and unbundle all its listed interests."
Botha suggested placing the unlisted interests into Reinet. "There are some attractive unlisted assets like Unilever and TSB Sugar."
The Remgro results - which still showed a contribution from BAT but excluded the dividend payout - understandably yielded a much lower dividend of 80c/share. At the current share price, the payout represents a half-year yield of around 1%.
Overall, it would seem Remgro performed soundly with headline earnings only slightly down at R4bn. But if the BAT contribution is stripped out, Remgro's earnings fell 13% to R1.99bn. The earnings contribution from financial services interests (RMB and FirstRand) declined markedly, from over R1bn to under R800m.
Earnings also dropped at Remgro's industrial interests (Rainbow, Distell, Unilever, Medi-Clinic), contributing R847m (last year: R970m) to headline earnings.
Remgro's mining interests (mainly Impala Platinum) showed an improvement with a R296m contribution to headline earnings.
Remgro - as is its habit - remains cash flush. The interim results showed cash at the centre increasing by R470m to R3.7bn, mainly due to investments realised and dividends collected.
Available cash - including Remgro's share of the tobacco cash - sits at close to R6bn.
* Hasenfuss holds shares in Remgro.