Share price: R215 JSE code: REM
HOLD INVESTMENT COMPANY REMGRO looks far more interesting now that the market has started to reappraise the heady valuation stuck onto private hospitals subsidiary Mediclinic International.
With Mediclinic less dominant in the intrinsic value calculation, investors can more fully appreciate the rest of Remgro’s portfolio. There are solid, long-term positions in listed and unlisted companies (consumer-driven RCL Foods, Distell and Unilever SA), as well as financial services (RMB/FirstRand and RMI), and intriguing smaller investments such as Grindrod, Dark Fibre Africa, Air Products, Total SA and Invenfin.
The portfolio balance could also change now that the company has reinvigorated its balance sheet through a sizeable rights issue. It seems likely Remgro’s next bold move will involve buying out all or part of SABMiller’s 29% stake in liquor giant Distell, which looks intent on building a global reach in ciders, wines and certain spirits.
There may be an opportunity for Remgro do to some housekeeping — perhaps buying out minority shareholders in RCL Foods or Grindrod. The hitch is that the discount the share price offers on the portfolio value is not as wide as in past years. Maybe perceptions have changed now that Remgro is looking more adventurous on the deal-making front.
But current market conditions, as well as complications with Mediclinic’s recent corporate activities, may yet see the discount widen to more compelling ranges.