Still discounting underlying value

INVESTORS WHO HELD Mvelaphanda Group stock over the past few months, even years, have been handsomely rewarded by the recent unbundling of its Life Healthcare stake through the special purpose vehicle Health Strategic Investments (HSI) and are in line for yet more generous rewards, as the company is still trying to unlock value.

To put matters into perspective: every 100 Mvela shares investors have yielded 33,45 HSI shares. These carried a current market value of 1283c/share at the time of writing. At unbundling, Life Healthcare yielded the equivalent of 349c/Mvela share. Mvela itself is currently valued at 482c/share on the JSE. In the year ended June, each of those shares earned 215c.

Life Healthcare was only one of a few strategic investments Mvela held. Further investments still have to be unlocked, key among which is its biggest revenue earner, Mvelaserve. The group put the value of its intrinsic net asset value in cash-generative Mvelaserve at 223c/share. As recently as last week, Mvela Group said it would list the asset on the JSE and unbundle the shares to its shareholders.

The other parts of Mvela Group make up a total NAV of 441c/share. Those are its investment in Absa Group, construction company Group Five, media company Avusa and Vox Telecom and the R427m cash in Mvela’s books at end-June.

Credit Suisse Standard Securities says at those levels Mvela is still a buy, offering a 32% discount to its real value. It’s moved its 12-month target price to 640c/Mvela share before the unbundling of Mvelaserve and a possible unbundling or disposal of the other parts, which will take an estimated three years to achieve. Mvela Group says it’s waiting for the best opportunity to list Mvelaserve. Any possible buyout offer before such separate listing will also be welcome.