Financial Mail - Investors Monthly - - Opening Bell -

Share price: R26.64 JSE code: REI

BUY. REINET IN­VEST­MENTS IS ALL ABOUT per­spec­tive. Ei­ther in­vestors are buy­ing one of the best de­fen­sive stocks in the world, Bri­tish Amer­i­can To­bacco (BAT), at a marked dis­count; or they are buy­ing BAT and get­ting an ar­ray of other in­vest­ments — in­clud­ing promis­ing UK-based fi­nan­cial ser­vices busi­ness Pen­sion Corp (Pen­sCorp) — for free.

At the time of writ­ing, Reinet’s mar­ket cap­i­tal­i­sa­tion on the JSE was roughly equal to its re­main­ing 3.7% stake in BAT. The sit­u­a­tion is per­haps un­der­stand­able, as the gen­er­ous div­i­dends from BAT do not flow through to Reinet share­hold­ers in their en­tirety, but are mo­bilised to make ad­di­tional in­vest­ments in the ex­ist­ing port­fo­lio or build new po­si­tions.

Share­hold­ers get a di­ver­si­fied port­fo­lio of di­rect in­vest­ments (US land, di­a­monds, fi­nan­cial ser­vices, phys­i­cal gold) and in­di­rect in­vest­ments in other spe­cialised in­vest­ment funds. The non-to­bacco parts of the port­fo­lio, aside from Pen­sCorp and maybe Tri­lan­tic Cap­i­tal Part­ners, have not blazed glo­ri­ously. But in volatile trad­ing con­di­tions, cer­tain spe­cial­ist in­vest­ment funds may spark into life.

Reinet offers a highly dis­counted de­fen­sive play, an­chored by a core in­vest­ment that spins cash and main­tains su­perb pric­ing power. At the time of writ­ing, the dis­count to es­ti­mated in­trin­sic net as­set value was about 23%.

This may be an en­tic­ing op­por­tu­nity for those who believe chair­man Jo­hann Ru­pert can suc­cess­ful hedge Reinet against in­creas­ingly jit­tery in­ter­na­tional markets.

The writer holds shares in Reinet

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