Remgro at a 20% discount

Cape Town - Interim results from the Stellenbosch-based industrial conglomerate Remgro showed a more than 10% improvement in its intrinsic net asset value - the most important gauge in measuring the performance of an investment company - since its financial year-end at the end of March 2009.

Intrinsic NAV was stated at R110.54/share as at the end of September compared with R99/share at the end of March this year. The upward shift in NAV reflects the improved market conditions in the latter part of 2009.

Remgro's trading profit, however, was down markedly to R373m and dividends (without the payout from former associate British American Tobacco) came in at R80m (previously R315m). CEO Thys Visser said these were the toughest trading conditions he had seen for a long time.

But Remgro, which retains around R4.5bn cash at its centre, hiked its interim dividend by 5% to 84c/share.

Visser said Remgro's many years of financial conservatism meant the group was able to manage a small hike in dividends despite a 35% fall in profits.

"We have always said we prefer to pay constant dividends throughout the cycles as a protection against inflation."

The worst operational performers were oil company Total (which notched up a loss of R44m) and safety glass specialist PGSI (which posted a loss of R54m).

Visser said he hoped Remgro's financial services interest could muster a better showing on the back of lower incidents of bad debt provisions.

Remgro also took a R900m smack in the form of forex losses courtesy of the recent strength in the rand. Visser disclosed that around 80% of the group's cash pile was held in euros and dollars.

The latest NAV figure of R110/share means Remgro's shares -which finished at R88.52 on the JSE - are offering a discount of around 20% on the underlying value.

A discount of around 20% is largely regarded as "normal" for Remgro, although in recent years the discount has ranged as low as 15% and as high as 28%.

The financial services axis of RMB Holdings and FirstRand - valued collectively at over R16bn - continues to account for a major part of NAV.

Listed investments like Medi-Clinic (R5.7bn), Implats (R4.7bn), Distell (R4bn), Rainbow (R3.5bn) and Nampak (R1.3bn) also contributed to the bulk of its NAV.

Unilever remains Remgro's biggest unlisted investment, valued at some R4.3bn. Remgro's unlisted interests will grow markedly when it completes a merger with its corporate cousin Venfin, which holds unlisted interests like e-tv, Tracker, SAIL, SEACOM and Britehouse.

- Fin24.com