Rare feat for PSG

Idoubt there is a company on the JSE — with the possible exception of Brimstone — that works harder to make its AGM an engaging and enlightening affair for shareholders than does PSG Group (and its listed investments). Founder and chairman Jannie Mouton traditionally reminds shareholders of the current value of just R100,000 invested in

PSG in November 1995 (when the old PAG shell was acquired). I remember breaking the PSG/PAG takeover story for Business Report, but not buying shares (which were at 35c, I seem to recall).

It pains me that a R100,000 investment is now worth R500m — a compound annual growth rate (CAGR) of 48%. PSG endured some rough times after the A2-rating banking crisis in the early 2000s, and even needed to fend off (with a little help from Markus Jooste) a hostile takeover from Absa.

In 2004 PSG’S shares had collapsed to just 289c, after peaking at R17 in 1998. Still, a 48% CAGR is a feat that will take some matching. Mouton, though, cautions that, given PSG’S size (R54bn), it is highly unlikely, if not impossible, to achieve similar returns in the future. For illustrative purposes only, Mouton looked ahead 10 years to estimate a share price of R943 and a market capitalisation of R206bn for PSG, based on a 15% CAGR. At a 25% CAGR, PSG’S shares would grow — academically speaking — to R2,170 or R475bn over 10 years. Mouton quipped that a CAGR of 15% was not “the way we like to do things” and that 20%-25% was more in PSG’S ballpark. While the main constituents of PSG’S portfolio look stout (Capitec Bank, Pioneer Foods, Kaap Agri, Curro/stadio and PSG Konsult) any hopes of achieving a 20%-25% CAGR will depend on growing smaller investments in PSG Alpha into big winners.

I’ve said this before, and I’ll say it again: the company to watch in PSG Alpha is power management business Energy Partners. I reckon this specialist business could come to market next year. PSG says that if Energy Partners can corner just 1% of the R2 trillion energy generation and conversion market, the company will have assets of R20bn. And then there’s Energy Partners’ new foray into desalination, which could be lucrative considering dire water shortages in the Western Cape.

Stake snapped up

BB Investments, the investment subsidiary of Bidvest, has disembarked at transport group Cargo Carriers.

BB has long been an investor in this rather unremarkable mobility business, and there may have been times that shareholders wished the Bidvest brains trust had taken the wheel and steered Cargo to the high-profit road. BB’S significant minority stake of 13.59% has been snapped up by empowerment group New Seasons Investment Holdings. New Seasons holds investments in Fidelity Security Group and RMB Structured Insurance. One cannot help noticing that New Seasons also has stakes in Seweurodrive as well as Masslift Africa. With these “mobility” investments in mind, will New Season be a passenger at Cargo Carriers, or is there a plan to be a driving force by injecting new assets?

Decision spurred?

Three directors of Sovereign Food Investments — chairman Tom Pritchard, CEO Chris Coombes and marketing executive Gerald Walter — have spent a cool R15m buying shares in the Uitenhage-based poultry group. This is heartening, if one remembers that a few years ago a shareholder made the snide remark that his mother owned more shares in Sovereign than the executive team.

Of course, the willingness to acquire such large parcels of shares will fan hopes that the worst is over for Sovereign’s chicken business. But one might ask whether having rival Country Bird — now the biggest shareholder in Sovereign — predatorily perched might have spurred a decision by key directors to claw at scrip. If further hostilities ensue, every share will count. Whatever the case, shareholders will delight in seeing the share at a five-year high.

Jannie Mouton traditionally reminds shareholders of the current value of just R100,000 invested in PSG in November 1995