Publications
Partners
YES, us old market watchers should know better.
But come the release of a set of Remgro results and most of us are out scouring for clues that might suggest a change in strategy - something that might signal the Stellenbosch-based investment trust is going to unlock value for shareholders.
There's not much in Remgro's latest interim results to hang any form of reasonable speculation on. I'd have to admit Remgro's interims - which obviously don't include the recently-acquired Venfin portfolio - were not exactly the most exciting set of results I've gazed upon this year.
Indeed, there were some parts of the portfolio - and here I think of some rather dismal performances from Total SA and PGSI - that were downright ugly.
Still, I would contend that Remgro retains its status as the premier investment vehicle on the JSE - a share that every South African should own (at least while our empowerment conglomerates keep dismantling with unerring regularity).
Why do I say that?
Firstly, Remgro offers a spread of top-quality listed investments, most notably influential stakes in FirstRand/RMB, Medi-Clinic, Distell and Rainbow Chickens.
Then there is a selection of unlisted investments that, for the most part, cannot be easily accessed by ordinary investors. These would include strategic stakes in consumer brands powerhouse Unilever, Air Products, Kagiso Trust Investments, e-tv, Tracker and undersea cable specialist Seacom (which has already paid its first dividend).
One should also not forget Remgro's imposing cash pile, which - as at the end of September - stood at R4.7bn. This cash pile is held mostly in dollars and euros which, in the interim period, gave rise to a R900m forex loss thanks to the stronger rand. But this currency pain might quickly go away (an issue discussed more fully in the latest edition of Finweek).
Of course, the best part of all is that Remgro's underlying investments are priced at a substantial discount on the JSE. At Thursday's closing price of 8 680c, Remgro is discounting its intrinsic value of R110 per share as at the end of September.
To bring things more up to date, Investec Securities analyst Thane Duff estimates that Remgro (now with Venfin on board) carries an intrinsic value of almost R113/share.
Duff admits he is more conservative on Remgro's Unilever stake. If Remgro's valuation is applied, the intrinsic value stretches to over R114/share.
But it's not just the enticing discount that is attractive at Remgro. While there's no evidence of any conscious effort to unlock value for shareholders, I believe the group will make some changes.
In this regard I note the appointment of Venfin CEO Jannie Durand as chief investment officer, which reinforces my earlier speculation that Durand is set to take the reins from long-serving Remgro CEO Thys Visser in the not-too-distant future.
Visser, ever the stoic, told me this week that Remgro's model has not changed, reiterating that the unbundling of British American Tobacco last year was "for reasons beyond our control".
Personally, I think a gradual change is essential at Remgro. In this regard I would like to see the ratio of Remgro's listed and unlisted investments changing from the current 70:30 split.
For me that would entail a couple of major corporate developments. In this regard I would not be an unhappy shareholder if Remgro opted to unbundle its stakes in FirstRand and RMB. Buying out minorities and delisting operating subsidiaries like Rainbow Chickens and Medi-Clinic would also be fine by me. (Maybe it's also a good time to make a buyout bid for Trans Hex?)
I also think Remgro needs to do some housekeeping to clear out the rats and mice. I certainly won't miss the stake in dour packaging group Nampak. And why is Remgro clinging onto that minuscule stake in Caxton?
Perhaps some consideration can also be given to Remgro's small stake in Impala Platinum, which would realise (even at current prices) a whopping R4.7bn.
Part of the substantial proceeds from Impala could be used to fund some of the high-growth businesses that came with Venfin - not to mention some of Remgro's recent investments like PGSI and Xiacom.
Just some thoughts - use it, don't use it.
Sunny days for GPI and RAH?
Just as I was penning this column, one of my deep throats tipped me off to developments at gaming investment company Real Africa Holdings (RAH).
It seems - and I stress this is market talk - that Sun International (which owns 65% of RAH) and Grand Parade Investments (which owns 30% of RAH) have come to an agreement.
What I am led to believe is that GPI will sell its stake in RAH to Sun International in exchange for a stake in one of Sun's casinos.
As GPI already owns large stakes in the GrandWest and Worcester casinos, I hope it's a deal that offers some geographic diversity. Sibaya in Durban perhaps?
Fair play
Fin24's story this week on Mayfair Mining defaulting on interest payments (set at 3% a month!) refers.
There is a simple rule in investing: "If it sounds to good to be true, it probably is."
When a company offers you a guaranteed annual return of 36%, you simply have to question why in hell anyone would choose such a strenuous capital-raising strategy.
Some sceptics believe the only way to pay 3% interest rate a month would be by using the actual capital raised to service investors every month.
Hmmm...
- Fin24.com
