{"id":561709,"date":"2024-09-22T18:00:00","date_gmt":"2024-09-22T16:00:00","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=561709"},"modified":"2024-09-22T18:31:31","modified_gmt":"2024-09-22T16:31:31","slug":"remgro-a-solid-bet","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/561709-remgro-a-solid-bet.html","title":{"rendered":"Remgro a solid bet"},"content":{"rendered":"\n

Gary Davids, an investment analyst at Sanlam Private Wealth, said Remgro offers investors a high margin of safety with good potential upside.<\/p>\n\n\n\n

Remgro is an investment holding company based in Stellenbosch, South Africa. Billionaire Johann Rupert chairs its board and strongly influences the company.<\/p>\n\n\n\n

Remgro has interests in banking, financial services, packaging, glass products, medical services, mining, petroleum, beverage, food and personal care products.<\/p>\n\n\n\n

Its largest holdings as a percentage of net asset value (NAV) are Mediclinic (31%), OUTsurance (16%), Community Investment Ventures Holdings (CIVH) (9.5%) and FirstRand (7%).<\/p>\n\n\n\n

Remgro gives investors access to strong companies and exposure to assets expected to benefit from improved South African economic growth.<\/p>\n\n\n\n

Davids said Remgro has been a stalwart in the Sanlam Private Wealth Equity portfolio for many years.<\/p>\n\n\n\n

Shares in the Stellenbosch-based investment behemoth have historically traded at an average discount of 15% to their net asset value (NAV).<\/p>\n\n\n\n

However, the current 45% discount is the largest it has been in over a decade, providing investors with an even better margin of safety.<\/p>\n\n\n\n

Davids explained that the high margin of safety prompted them to add the company to their clients\u2019 portfolios.<\/p>\n\n\n\n

\u201cBeyond the benefits of diversification to remain competitive, Remgro exhibits low financial risk given its net cash position,\u201d he said.<\/p>\n\n\n\n

What is particularly appealing is that these strengths are currently available at the largest discount to NAV in over a decade, providing investors with a considerable margin of safety.<\/p>\n\n\n\n

\u201cWhile holding companies normally trade at a discount to NAV, Remgro\u2019s discount has expanded significantly, growing from around 15% to 45% in recent years,\u201d he said.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Several factors have contributed to this widening discount, including the negative sentiments towards South African assets.<\/p>\n\n\n\n

\u201cIssues such as slow economic growth, political uncertainty and structural challenges have resulted in reduced investor confidence,\u201d he said.<\/p>\n\n\n\n

These factors impact the valuations of companies tied to the South African economy, like Remgro.<\/p>\n\n\n\n

Another contributing factor is the illiquidity of Remgro\u2019s underlying investments. Over the past few years, Remgro\u2019s composition of NAV has shifted toward unlisted assets.<\/p>\n\n\n\n

These increased to 65% after the conclusion of the Heineken-Distell reorganisation and the Mediclinic buyout.<\/p>\n\n\n\n

The unlisted holdings, such as Mediclinic, CIVH and Heineken Beverages (5% of NAV), are not as easily tradable and have been exposed to poor earnings and corporate action costs.<\/p>\n\n\n\n

The Heineken Beverages and Mediclinic businesses have seen their valuations decrease on the Remgro books due to poor performance.<\/p>\n\n\n\n

In addition, the corporate action between CIVH subsidiary Maziv, the parent company of Dark Fibre Africa and Vumatel, and Vodacom has been delayed.<\/p>\n\n\n\n

Vodacom\u2019s planned acquisition of a 30% stake in Maziv and subsequent capital investment was set to drive growth and reduce debt within Maziv.<\/p>\n\n\n\n

The deal, which is currently with the Competition Tribunal, would also increase Remgro\u2019s net cash position.<\/p>\n\n\n\n

The uncertainty surrounding this issue and a spate of poor earnings from large underlying investments have further increased the discount.<\/p>\n\n\n\n

Despite these challenges, Sanlam Private Wealth believes that Remgro is well positioned to benefit from an improving South African economic cycle and lower interest rates.<\/p>\n\n\n\n

In addition, the contribution of listed assets to NAV dropped from 78% in 2015 to 33%. \u201cWe view this decline as a positive outcome,\u201d Davids said.<\/p>\n\n\n\n

Remgro recently sold its holding in Momentum, with more sales in the listed portfolio on the cards.<\/p>\n\n\n\n

This, combined with positive capital allocation decisions, could further reduce discount to NAV.<\/p>\n\n\n\n

\n\n\n\n

This article was first published by Daily Investor<\/a> and is reproduced with permission.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Gary Davids, an investment analyst at Sanlam Private Wealth, says Remgro offers investors a high margin of safety with good potential upside.<\/p>\n","protected":false},"author":341108,"featured_media":486003,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80335],"tags":[53235,23945,97136,97137,21385,81711,21387,92509,41,25299],"class_list":["post-561709","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-community-investment-ventures-holdings-civh","tag-dark-fibre-africa-dfa","tag-gary-davids","tag-heineken-distell","tag-johann-rupert","tag-maziv","tag-remgro","tag-sanlam-private-wealth","tag-vodacom","tag-vumatel"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/561709"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341108"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=561709"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/561709\/revisions"}],"predecessor-version":[{"id":561711,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/561709\/revisions\/561711"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/486003"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=561709"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=561709"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=561709"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}