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