Reinet in new buyback bout
Rupert firm to return R1.2bn to investors after earlier repurchase round
Reinet, the investment firm controlled by the Rupert family that owns nearly 3% of British American Tobacco, plans to return another R1.2bn to investors following the recent decline in its share price. The company said on Wednesday it would launch another round of share buybacks, this time worth up to €75m (R1.2bn). This follows an earlier repurchase programme in which it spent R667m.
Reinet, the investment firm controlled by the Rupert family that owns nearly 3% of British American Tobacco (BAT), plans to return another R1.2bn to investors following the recent decline in its share price.
The company said on Wednesday it would launch another round of share buybacks, this time worth up to €75m (R1.2bn). This follows an earlier repurchase programme in which it spent R667m, plus transaction costs, in the two months to January 30.
Reinet said on Wednesday the buy-backs would “return value” to shareholders, who have urged the firm for some time to sell down its BAT stake and repurchase its own stock.
They argue that Reinet’s shares are trading at a hefty discount to net asset value (NAV).
Following Wednesday’s announcement, the company’s stock gained 3.2% to close at R211.21, its best level in two weeks, but about 26% below a recent high of R286.19 in September 2018.
The firm said the repurchased stock could be used to pay for acquisitions.
However, Gryphon Asset Management portfolio manager Casparus Treurnicht said the buy-backs suggest that “there are probably not many investment opportunities available at the moment”.
Including the earlier repurchase programme, Reinet was on track to acquire 4.2% of its shares in issue, said Treurnicht.
However, the company’s discount to the value of its portfolio remains stubbornly high.
Treurnicht said that taking into account BAT’s recent share decline the stock has fallen about 41% in a year, partly thanks to a mooted ban of menthol cigarettes in the US Reinet’s NAV per share was sitting at about €21.20.
That implied a discount to NAV of about 39%, versus 38% on November 19 when Reinet announced its first repurchase programme. “This tells me that management will continue buying back shares for quite a while,” said Treurnicht.
“I am inclined to say that regardless of what happened at BAT, Johann Rupert believes his portfolio is undervalued.”
Reinet said in its announcement the Rupert family would not sell any shares during the repurchase programme.
The stock buy-backs coincide with a change in its portfolio mix, with the relative exposure to BAT significantly reducing in recent months.
At the end of December, the tobacco firm accounted for 48.6% of Reinet’s portfolio, while UK-based Pension Insurance Corporation makes up 30.9% of the portfolio. When Reinet listed in 2008, BAT made up more than 85% of its portfolio.
Meanwhile, Reinet’s buyback plans pale in comparison to some other global investment firms. Japan’s SoftBank said on Wednesday it would buy back $5.5bn (R74bn) of stock, partly funded by the listing of its telecommunications business.
SoftBank’s shares gained 0.6% on the day, valuing the company at R1.1-trillion. According to Bloomberg, SoftBank is trading at a 59% discount to its sum-of-the-parts valuation.
Naspers, which is also trading at a large discount to NAV, has also been under pressure to buy back shares, though management has said it can put its cash pile to better use.
Naspers finance chief Basil Sgourdos said in 2018 stock repurchases would not address the structural problems behind the discount and would only result in a short-term bump in the share price.
I AM INCLINED TO SAY THAT REGARDLESS OF WHAT HAPPENED AT BAT, JOHANN RUPERT BELIEVES HIS PORTFOLIO IS UNDERVALUED