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“Our focus remains to create wealth for our shareholders by increasing both PSG’s recurring headline earnings and SOTP (sum-of-the-parts) value per share. We remain committed to providing superior investment returns.” That’s well-intentioned – but pretty mundane, by the usual adventurous standards of PSG Group [JSE:PSG] chairman Jannie Mouton, who was commenting on the company’s results for the year to end-February this year.
But before you think PSG has been cowed by setbacks at subsidiary Zeder Investments [JSE:ZED] (which was beaten back in its efforts to merge KWV into Pioneer Foods) it may be a valuable exercise to have a squiz at a recent presentation made as part of the JSE Showcase series.
One slide – tagged “key plans at PSG” – asks tantalisingly: “Major new acquisition: R1bn in size?” That should get a few tongues wagging. And Finweek’s sources in and around Stellenbosch were quite surprised to hear a suggestion that PSG could look at a major acquisition at this juncture. The general consensus is that PSG currently has plenty on its plate. Capitec Bank Holdings [JSE:CPI] is growing apace, Paladin Capital [JSE:PLD] is launching ambitious plans to list its private education interests and agribusiness investor Zeder has a field of opportunities to plough.
The presentation document makes mention of PSG’s willingness to make earnings-enhancing acquisitions – but also indicates there’s a possibility of building on existing interests. “For example, increase stakes or follow rights in Zeder, Paladin, PSG Konsult and Capitec.”
Unlike Stellenbosch’s other famous investment house – Remgro – PSG doesn’t have billions of rand in free cash. However, PSG still has some means for deal-making. Last year it raised R502m in cash through the issue of 5,8m PSG Financial Services perpetual preference shares. PSG now has around R1,2bn in perpetual preference share funding, of which R440m has been fixed at a cost of 8,87%/year until end-August 2016 and R650m at 8,6% until end-August 2020.
PSG has already invested almost R500m in its “core” portfolio, which had created close to R150m in value for shareholders as at end-February this year. The deployment was mainly into Capitec – around R424m, most of it pitched during the recent rights issue. PSG’s year to end-February results show cash and facilities available for reinvestment are R400m.
We might safely presume – in lieu of hints at a R1bn acquisition – that PSG will consider further preference share issues in its new financial year. Of course, the billion rand question is: What could PSG possibly be eyeing? With PSG – which holds direct and indirect investments in practically every economic sector – a new deal could practically be anything.
Finweek, if it were to hazard a guess, might plump for PSG pushing for a deal to bulk up wealth management subsidiary PSG Konsult.
Recently, PSG’s Asset Management business – long regarded as its Cinderella subsidiary – was restructured and pushed under the PSG Konsult umbrella. PSG Konsult – headed by the under-rated Willem Theron – is one of the unsung heroes in the PSG stable. The division (with the asset management segments on board) pushed out headline earnings of R93m in the year to end-February.
PSG has placed a value of R1,2bn on the enlarged PSG Konsult business. With Capitec (holding a value of more than R5bn) making up more than 50% of PSG’s sum-of-part valuation it seems a fairly urgent exercise to bring some balance to the portfolio.
To date, PSG Konsult has followed a strategy of making small, niched acquisitions. But its Asset Management segment – with R31bn of funds under administration and R13bn of funds under management – may well be an ideal candidate for a major bulking-up exercise.
Investment boutiques everywhere might watch their backs…
But before you think PSG has been cowed by setbacks at subsidiary Zeder Investments [JSE:ZED] (which was beaten back in its efforts to merge KWV into Pioneer Foods) it may be a valuable exercise to have a squiz at a recent presentation made as part of the JSE Showcase series.
One slide – tagged “key plans at PSG” – asks tantalisingly: “Major new acquisition: R1bn in size?” That should get a few tongues wagging. And Finweek’s sources in and around Stellenbosch were quite surprised to hear a suggestion that PSG could look at a major acquisition at this juncture. The general consensus is that PSG currently has plenty on its plate. Capitec Bank Holdings [JSE:CPI] is growing apace, Paladin Capital [JSE:PLD] is launching ambitious plans to list its private education interests and agribusiness investor Zeder has a field of opportunities to plough.
The presentation document makes mention of PSG’s willingness to make earnings-enhancing acquisitions – but also indicates there’s a possibility of building on existing interests. “For example, increase stakes or follow rights in Zeder, Paladin, PSG Konsult and Capitec.”
Unlike Stellenbosch’s other famous investment house – Remgro – PSG doesn’t have billions of rand in free cash. However, PSG still has some means for deal-making. Last year it raised R502m in cash through the issue of 5,8m PSG Financial Services perpetual preference shares. PSG now has around R1,2bn in perpetual preference share funding, of which R440m has been fixed at a cost of 8,87%/year until end-August 2016 and R650m at 8,6% until end-August 2020.
PSG has already invested almost R500m in its “core” portfolio, which had created close to R150m in value for shareholders as at end-February this year. The deployment was mainly into Capitec – around R424m, most of it pitched during the recent rights issue. PSG’s year to end-February results show cash and facilities available for reinvestment are R400m.
We might safely presume – in lieu of hints at a R1bn acquisition – that PSG will consider further preference share issues in its new financial year. Of course, the billion rand question is: What could PSG possibly be eyeing? With PSG – which holds direct and indirect investments in practically every economic sector – a new deal could practically be anything.
Finweek, if it were to hazard a guess, might plump for PSG pushing for a deal to bulk up wealth management subsidiary PSG Konsult.
Recently, PSG’s Asset Management business – long regarded as its Cinderella subsidiary – was restructured and pushed under the PSG Konsult umbrella. PSG Konsult – headed by the under-rated Willem Theron – is one of the unsung heroes in the PSG stable. The division (with the asset management segments on board) pushed out headline earnings of R93m in the year to end-February.
PSG has placed a value of R1,2bn on the enlarged PSG Konsult business. With Capitec (holding a value of more than R5bn) making up more than 50% of PSG’s sum-of-part valuation it seems a fairly urgent exercise to bring some balance to the portfolio.
To date, PSG Konsult has followed a strategy of making small, niched acquisitions. But its Asset Management segment – with R31bn of funds under administration and R13bn of funds under management – may well be an ideal candidate for a major bulking-up exercise.
Investment boutiques everywhere might watch their backs…
