PIC trots out all its investment reasons

You have to give it to the Public Investment Corporation (PIC), it always has a good excuse, or rather explanation, for committing hundreds of millions, often billions of its beneficiaries’ rand to a company.

The detailed investment schedule of unlisted investments that the PIC released in 2017, at the insistence of the DA, referred to many of these explanations.

The investment that is topical is Project Sierra, which related to the R9.3bn loan the PIC made to an entity called Lancaster 101 in September 2016. The money was to be used to invest in Steinhoff either directly or indirectly.

The PIC said the “investment was done with the intention to (sic) drive transformation in an untransformed sector”.

This was an excellent intention. Remarkably, despite the importance of women and previously disadvantaged individuals in Steinhoff’s target market there is little sign of either playing much of a role in the decision-making in the Steinhoff group. Similarly with all the other Steinhoff/Christo Wieserelated retail groups.

Recall that in 2012, Wiese announced that Shoprite was about to make its first female appointment to the board. The indomitable Anna Mokgokong, who serves on a number of boards, took up the challenge. Mokgokong remains the only female on the Shoprite board.

At Steinhoff, the number of female and/or previously disadvantaged directors has remained unchanged since the PIC made its additional investment. So it seems the government employees whose pensions are in the hands of these powerful fund managers have been let down badly.

Not only has there been no transformation but even before the December meltdown in the share price, the financial returns were in negative territory.

Marshall Monteagle is not the best-known investment company on the JSE by any stretch of the imagination. Its low-key reputation would have been enhanced by the release of interim results to end-September on December 21, when most market participants had closed up shop for the Christmas holidays.

The interim numbers did at least tell an encouraging story with headline earnings from continuing business rocketing to almost $0.13/share (or 160c/ share) with another decent dividend to boot.

One of the more interesting strategic investments fermenting in its portfolio is its 11.9% stake in unlisted British pub ’n grub business Heartstone Inns.

The stake is valued at around $2.6m (R32m). This would infer a value of about $22m for the entire Heartstone business, which comprises 15 outlets.

Marshall Monteagle’s holding in Heartstone became all the more interesting after City Pub Group (CPG) – owner of a chain of “premium pubs” — enjoyed a successful initial public offering of £46.6m on the London Stock Exchange’s AIM board in November 2017.

CPG, which carries a market value of about £95m for its 34-strong pub portfolio, is a fairly big operation.

By comparison, the much smaller Heartstone might not have the operational traction yet to justify a listing on AIM (or other bourses).

But it might be worth considering whether CPG’s plans to double the size of its portfolio over the next three to four years might involve buying a “cheap round” of Heartstone to froth up its market share.