Sometimes boring is best
The travails of Steinhoff International put a good many things in perspective for the shocked investment community. For me, the devastating collapse of the company’s share price forced me to reconsider what I had intended to write about Remgro as the “bastion of boredom”.
Remgro has looked a little uninspired of late, and to hear chairman Johann Rupert make some scathing remarks at the recent AGM about key investment Mediclinic International’s acquisition strategy was rather startling.
Some may even have interpreted this as meaning Remgro may rein in acquisitive endeavours at its underlying investments, particularly Distell and
RCL Foods, where additional operational span could be useful.
Remgro’s drawback, for me, is that the bulk of its value lies in listed investments. And this issue will be more acute after the significant minority stake in Unilever SA is sold off.
There are some really interesting unlisted businesses — including fibreoptic specialist Dark Fibre Africa, undersea cable group Seacom, energy group Total SA, industrial gases business Air Products and even building equipment supplier Wispeco — that are overshadowed by the much larger listed holdings.
Rupert’s comments at the AGM certainly dismiss any notions that the Mediclinic stake could be unbundled, or that any significant value-unlocking changes are in the offing for the portfolio.
Then, again, snapping up quality cash-generative and easily valued assets such as Mediclinic, Firstrand, Rand Merchant Investment Holdings, Distell and RCL Foods at a discount does seem prudent in an investment landscape littered with the debris of the Steinhoff fallout.
The late, great Thys Visser, who steered Remgro through thick and thin, took pride in the group’s in-built conservatism, often referring to the maintenance of an insurance policy to ensure shareholders received dividends even in the lean periods.
“Boring” may be the best badge to wear in these tremulous times.
Spurring on GPI
The AGM of empowerment company Grand Parade Investments (GPI) — conveniently held at 6 pm, to allow working folk to attend — was a lengthy affair. For me, the key question during the proceedings was whether GPI should buy back its own shares rather than nibble away at fast-food franchiser Spur Corp, where it already has an influential stake.
GPI chairman Hassen Adams, who bristled with bravado throughout the meeting, confirmed that the company has an appetite for more Spur shares.
If GPI can build enough influence at Spur, it probably has more options for its investment in fast-food business Burger King, which is expected to reach the 80-store mark by the end of June.
But there is a compelling value proposition in GPI, which trades at a hefty discount to intrinsic net asset value. Adams highlighted the yield attractions of buying further Spur shares — to really fortify influence, GPI will need to snatch a large parcel of shares from one of the institutional shareholders (which will surely hold out for a premium price). Frankly, a 260c share price versus an intrinsic value north of 650c/share seems a no-brainer in terms of pursuing further share buybacks with some vigour.
Adams did refer to an approach — presumably an informal inquiry — to buy out GPI at double the ruling share price. He deemed such an offer a no-no, and it does indicate some appreciation of the value to be had in GPI — if Burger King serves up meaningful profits, and smaller food ventures such as Dunkin’ Donuts and Baskin-robbins are not too much of a distraction.
Adams stressed that capital expenditure would be earmarked strictly for cash-generative initiatives (in other words, Burger King).
But no shareholder would begrudge him if an odd R1m-r2m were mobilised to mop up woefully undervalued scrip in the open market.
The late, great Thys Visser, who steered Remgro through thick and thin, took pride in the group’s in-built conservatism