Time for a change
The reasons for the continued existence of holding company RMB Holdings (RMH), which has an influential stake in banking giant Firstrand as its main asset, remain flimsy. And initial efforts to diversify by investing in property don’t provide too much inspiration.
Yes, the property segment has grown by acquisition — but the intrinsic value of about R2bn pales in comparison with the R122bn value accorded to the Firstrand stake. In fact, the intrinsic value of the property segment amounts to less than a quarter of RMH’S share of normalised earnings from Firstrand.
There is a long way to go before investors recognise RMH as an investment company rather than a holding company or proxy for Firstrand.
This perception won’t be helped by RMH’S recently released final results, which show that 49%-owned urban renewal specialist Propertuity “materially underperformed against expectations”.
RMH admits underestimating the operational complexity of expanding the business, and a full impairment was taken on the investment. It seems — judging from details provided on an impairment of assets and an impairment of associates — that the property segment took a hefty write-down of about R308m. Imagine the outcry if a listed real-estate counter with a market value of R2bn impaired the net value of its portfolio by 15% …
It’s a small comfort that RMH’S investment mezzanine debt and equity funding business, Genesis Properties, delivered robust intrinsic value growth ahead of expectations. The bottom line, though, is that the property segment delivered earnings of R16m.
Clearly RMH won’t be dissuaded from its property endeavours: commentary on the results throws in the possibility of international investments. But surely an enterprise steeped in (a legendary) entrepreneurial culture would recognise the merit of letting the property segment build character by fending for itself, rather than being swaddled?
Shifting out the property investments would mean RMH could unbundle its holding in Firstrand, and another horribly archaic and inefficient structure on the JSE could be dismantled.
Value flows from Delta
Closure at Delta EMD still seems some way off. Those (few) punters who positioned themselves for a winding-up payout may need to temper their hopes.
The good news: Delta is in discussions with “potential parties” interested in buying the Nelspruit plant site, the company’s last meaningful asset. This sale has been a protracted affair. But a favourable final external audit of the environmental conditions on the Nelspruit site will hasten these endeavours.
The bad news? The drawn-out efforts to sell the Nelspruit property have convinced Delta’s directors to impair the value of the plant site from R26m to R10m. This will result in an impairment expense of 32.4c a share — a development that pulled the rug on Delta’s share price. Tangible NAV was reflected as 194c a share at the end of December, which makes the lower share price of 100c an interesting prospect for investors with a penchant for special situations.
Gem of a deal?
Trans Hex Group put its market valuation into perspective when it announced a deal to sell off its head office in the unfashionable Cape Town hub of
Parow. The corporate HQ looks likely to fetch R28.5m in a deal with businessmen Darren Goodman and Adam
Singer. The price tag is equivalent to
24c a share, or roughly 20% of Trans Hex’s market capitalisation.
This is a decent (and unexpected) little fillip for long-suffering Trans Hex shareholders, who would have seen the property accorded a carrying value of just R1.2m in the most recent audited financial statements.
Shareholders will now be hoping Trans Hex can reinvest the proceeds in assets and projects that polish up much-dulled prospects.
Shifting out the property investments would mean RMH could unbundle its holding in Firstrand