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When Stellenbosch-based investment conglomerate Remgro sold off its stake in Nampak [JSE:NPK] last year, some key pronouncements were made about its strategy. At that time mention was made of capital being “available for redeployment into assets which are more closely aligned with Remgro’s investment strategy and in which Remgro [JSE:REM] has a higher degree of ownership and/or influence”. There was also an indication Remgro would “now focus on its core investments”.
If we look at Remgro’s clean-up effort then it’s been fairly industrious in shooing out the rats and mice. Its Nampak minority stake has been sold, the minority stake in diamond miner Trans Hex has been unbundled, its interest in technology group Xiacom was unceremoniously snuffed out and (most recently) the stake in mobile financial services specialist Fundamo sold for a good profit.
But with the market still placing a 20% discount on Remgro’s intrinsic value of R136,12/share it would seem there’s still clean-up work to be done.
In that regard it’s probably encouraging – perhaps even surprising – to note Remgro is in negotiations to sell its major stake in vehicle recovery business Tracker, one of the first tech investments made by the old Rembrandt Group that’s served Remgro satisfactorily over the years. The stake is worth around R1,2bn and Finweek wonders if any of the listed vehicle recovery firms – Digicore and MixTelematics – might be involved in the negotiations.
The stake in former industrial giant Dorbyl – which is being wound down to not much more than a cash balance – should take care of itself.
But what does Remgro plan for its holding in doors and windows’ specialist Wispeco? Noting Remgro’s willingness to back glass specialist PGSI in its strenuous recovery efforts might prompt some speculation that Wispeco (valued at R321m) could form part of a larger steel, aluminium and glass group.
On the food front, TSB Sugar sold its citrus operations, realising an after-tax capital gain of R22m.
Probably the most intriguing interest is Remgro’s 5% holding in Impala Platinum. Clearly, this isn’t an investment where Remgro holds a high degree of ownership/influence… nor is mining a core investment. Its stake in Impala would fetch more than R5bn, which would push Remgro’s cash holdings close to the R11bn mark and mean it held sufficient ammunition for some serious deal-making.
Ever since bailing out of Gold Fields [JSE:GFI]and Billiton/Gencor all those years ago, Remgro hasn’t been considered a commodity investor. But then do we need to make anything of controlling shareholder Johann Rupert’s recent delving into diamond mining (via Reinet)? Unlike Tracker, its Impala holding hasn’t been reclassified as “held-for-sale” – so perhaps it’s best not to hold your breath for those big bucks to come rolling in any time soon.
Taking another tack, it might be asked then what would constitute Remgro’s “core” portfolio. It seems clear financial services – namely, RMB Holdings [JSE:RMH], RMI Holdings and FirstRand, with a collective value of almost R23bn – remain very much “core”.
Its industrial interests – collectively valued at around R30bn – will be anchored by stakes in listed counters such as private hospitals group Medi-Clinic Corporation [JSE:MDC] (R8bn), liquor group Distell Group [JSE:DST] (R4,7bn) and Rainbow Chickens (R4bn). But its industrial segment also has an attractive unlisted component – most notably the R5bn stake in Unilever SA, TSB Sugar (R2,8bn), Air Products (R2bn), Total SA (R1,6bn) and Kagiso Trust Investments (R1,5bn).
But much more fascinating in terms of core is what might be viewed as the future stars in Remgro’s vast firmament. Clues to where the future potential lies can be seen in fresh investments by Remgro.
Those investments are mainly in the “newer” Remgro legs – media and technology. While its media segment is underpinned by the holding in e.tv, it will be interesting to see how Remgro broadens this strategic segment. The Marc Group – mainly a sports brand investor – remains an underwhelming profit contributor. With a total value of R1,6bn (against a group NAV of around R70bn) its media segment is one area Remgro could look to grow with some vigour over the years ahead.
Perhaps Remgro’s post-balance sheet US$18m investment in Lashou Group, a Chinese marketing specialist, is a start? The technology side – worth around R2,5bn – currently looks more exciting, and it’s not only its stake in undersea communications cable Seacom. Remgro also seems to have taken a strong liking to fibre optics specialist Dark Fibre, where its initial stake of 33% (via the CIV Group) has been pushed to 44,3%. The CIV group – valued at R900m – chipped in R87m to Remgro’s headline earnings and appears to have traction.
Tax headache
REMGRO’s annual financial statements to end-March 2011 show a marked jump in guarantees and contingent liabilities to R2,2bn from R389m in its last financial year. According to a note on its financial statements the increase relates mainly to two tax assessments received from the SA Revenue Service. One assessment of R894m relates to the buyback and cancellation of treasury shares; the other assessment of R690m issued about the disposal of an (unspecified) investment. Remgro says the assessments are being disputed.
The guarantees and contingent liabilities represent around 4% of Remgro’s market capitalisation.
If we look at Remgro’s clean-up effort then it’s been fairly industrious in shooing out the rats and mice. Its Nampak minority stake has been sold, the minority stake in diamond miner Trans Hex has been unbundled, its interest in technology group Xiacom was unceremoniously snuffed out and (most recently) the stake in mobile financial services specialist Fundamo sold for a good profit.
But with the market still placing a 20% discount on Remgro’s intrinsic value of R136,12/share it would seem there’s still clean-up work to be done.
In that regard it’s probably encouraging – perhaps even surprising – to note Remgro is in negotiations to sell its major stake in vehicle recovery business Tracker, one of the first tech investments made by the old Rembrandt Group that’s served Remgro satisfactorily over the years. The stake is worth around R1,2bn and Finweek wonders if any of the listed vehicle recovery firms – Digicore and MixTelematics – might be involved in the negotiations.
The stake in former industrial giant Dorbyl – which is being wound down to not much more than a cash balance – should take care of itself.
But what does Remgro plan for its holding in doors and windows’ specialist Wispeco? Noting Remgro’s willingness to back glass specialist PGSI in its strenuous recovery efforts might prompt some speculation that Wispeco (valued at R321m) could form part of a larger steel, aluminium and glass group.
On the food front, TSB Sugar sold its citrus operations, realising an after-tax capital gain of R22m.
Probably the most intriguing interest is Remgro’s 5% holding in Impala Platinum. Clearly, this isn’t an investment where Remgro holds a high degree of ownership/influence… nor is mining a core investment. Its stake in Impala would fetch more than R5bn, which would push Remgro’s cash holdings close to the R11bn mark and mean it held sufficient ammunition for some serious deal-making.
Ever since bailing out of Gold Fields [JSE:GFI]and Billiton/Gencor all those years ago, Remgro hasn’t been considered a commodity investor. But then do we need to make anything of controlling shareholder Johann Rupert’s recent delving into diamond mining (via Reinet)? Unlike Tracker, its Impala holding hasn’t been reclassified as “held-for-sale” – so perhaps it’s best not to hold your breath for those big bucks to come rolling in any time soon.
Taking another tack, it might be asked then what would constitute Remgro’s “core” portfolio. It seems clear financial services – namely, RMB Holdings [JSE:RMH], RMI Holdings and FirstRand, with a collective value of almost R23bn – remain very much “core”.
Its industrial interests – collectively valued at around R30bn – will be anchored by stakes in listed counters such as private hospitals group Medi-Clinic Corporation [JSE:MDC] (R8bn), liquor group Distell Group [JSE:DST] (R4,7bn) and Rainbow Chickens (R4bn). But its industrial segment also has an attractive unlisted component – most notably the R5bn stake in Unilever SA, TSB Sugar (R2,8bn), Air Products (R2bn), Total SA (R1,6bn) and Kagiso Trust Investments (R1,5bn).
But much more fascinating in terms of core is what might be viewed as the future stars in Remgro’s vast firmament. Clues to where the future potential lies can be seen in fresh investments by Remgro.
Those investments are mainly in the “newer” Remgro legs – media and technology. While its media segment is underpinned by the holding in e.tv, it will be interesting to see how Remgro broadens this strategic segment. The Marc Group – mainly a sports brand investor – remains an underwhelming profit contributor. With a total value of R1,6bn (against a group NAV of around R70bn) its media segment is one area Remgro could look to grow with some vigour over the years ahead.
Perhaps Remgro’s post-balance sheet US$18m investment in Lashou Group, a Chinese marketing specialist, is a start? The technology side – worth around R2,5bn – currently looks more exciting, and it’s not only its stake in undersea communications cable Seacom. Remgro also seems to have taken a strong liking to fibre optics specialist Dark Fibre, where its initial stake of 33% (via the CIV Group) has been pushed to 44,3%. The CIV group – valued at R900m – chipped in R87m to Remgro’s headline earnings and appears to have traction.
Tax headache
REMGRO’s annual financial statements to end-March 2011 show a marked jump in guarantees and contingent liabilities to R2,2bn from R389m in its last financial year. According to a note on its financial statements the increase relates mainly to two tax assessments received from the SA Revenue Service. One assessment of R894m relates to the buyback and cancellation of treasury shares; the other assessment of R690m issued about the disposal of an (unspecified) investment. Remgro says the assessments are being disputed.
The guarantees and contingent liabilities represent around 4% of Remgro’s market capitalisation.
