Publications
Partners
From its early origins as a tobacco manufacturer in the late 40s, The Rembrandt Group, more commonly known as Remgro, has evolved into an investment holding company with a market capitalisation now in excess of R120bn.
The group’s investment interests include food, liquor and home care, banking, insurance, healthcare, industrial, infrastructure, media and sport.
The range of holdings within the Remgro portfolio provides investors with a diversified offering of market-leading public and privately-owned businesses.
The group has a history of unlocking impressive shareholder value as evidenced by the unbundling of British American Tobacco (BAT) in 2008, which is now one of the five biggest companies on the JSE in terms of market capitalisation.
The group also co-founded South Africa’s first cellular telecoms company Vodacom in 1993.
As of the last set of results for the 2015 financial year-end (30 June 2015), Remgro had the following effective company interests within the aforementioned portfolios:
Banking: 28.2% interest in Rand Merchant Bank Holdings and a 3.9% interest in FirstRand.
Insurance: 30.3% interest in Rand Merchant Insurance Holdings (RMI). In addition to providing access to listed companies Discovery Holdings and MMI Holdings, the RMI investment provides indirect access to the unlisted OUTsurance business.
Food, liquor and home care: 25.8% interest in Unilever SA, 31% interest in Distell and 77.5% interest in RCL Foods.
Infrastructure: 23% interest in Grindrod, 50.9% in CIV Holdings (infrastructure supporting fibre optic networks), 25% in Seacom (fibre optic bandwidth).
Industrial: 50% interest in Air Products (gas producer and distributor), 24.9% in Total SA, 34.9% in KTH (BEE-controlled investment holding company), 37.7% in PGSI (SA’s leading flat-glass business) and 100% WISPECO (manufacturing and distribution of extruded aluminium).
Media and Sport: 32.4% interest in Sabido (media interests including e.tv).
Healthcare: 42% interest in Mediclinic International. The company has invested in the Mediclinic and Al Noor reverse takeover deal which, upon implementation, should boost the healthcare segment to more than a third of the group’s total portfolio. The new Mediclinic should see around 80% of normalised earnings generated in hard currencies outside of SA, providing a partial currency hedge to the group.
Remgro trades on a modest forward price-to-earnings multiple (P/E) of 13.5 times while offering a historical dividend yield of 1.75%.
When looking at investment holding companies it is often more prudent to view the share price relative to its intrinsic net asset value (NAV) per share.
At the time of writing, Remgro was trading at around a 15% discount to its intrinsic NAV per share. While it is not unusual for Remgro to trade at this sized discount, the group has historically seen high double-digit growth in its fundamental value over the last few years.
In an uncertain global economic climate, Remgro provides investors access to a relatively defensive equity portfolio through its diversification.
Short-term volatility in equity markets might afford those with a longer-term view an even greater discount opportunity to accumulate a quality company with a track record of producing great value for its investors.
This article originally appeared in the 11 February 2016 edition of finweek. Buy and download the magazine here.
