Buyback bonanza

Things are very interestingly poised at printing and packaging group Novus Holdings. Readers will remember the bottom fell out of the group’s share price when it lost a chunk of business from newspaper and magazine giant Media24, though a new contract with Independent Media did partly replace lost business.

The latest trading update from Novus — which updated a September communiqué — suggests that earnings for the year to end-march will be a tad firmer than expected. Forecast earnings are set between 60c and 65c a share — nudging ahead of the initial prediction of 50c and 60c a share.

This gain may seem almost irrelevant considering that earnings in the year to end-march 2018 came in at about 102c a share. But investors who believe new leadership at Novus can find additional niches for the printing and packaging businesses will probably take heart at the development.

Reading between the lines, it would seem that Novus has had some success in keeping a lid on the costs of imported material, and that at least some of its new initiatives are bearing fruit. Naturally, one also has to consider the effect of some vigorous share buybacks — which might also temper enthusiasm when the year-end numbers are released. Then again, Novus has seemingly weathered the prolonged strike action in the plastics packaging sector, hampering activities at Plaslope.

As things stand, Novus is trading on a forward earnings multiple of about seven — if assuming earnings at the lower range of 60c a share.

That is probably fair considering the challenges in rejigging this business for sustained profitability in what is a shrinking printing sector and a packaging sector buckling under serious economic pressures.

Still, if Novus can endure these lean years and bag a smart acquisition or two, the 420c share price may offer enormous value. Cash flows have traditionally been solid here, and shareholders in the short term should at least be able to take comfort in a decent yield.

Where there’s smoke

The Rupert family’s international investment arm, Reinet, has executed its share buyback exercise with some determination. At last count the total number of shares repurchased was just over 2.2-million at a total cost of €32.2m. The exercise, though, has divided the opinion of my investment acquaintances. Some reckon the buyback is prudent considering the wide discount that Reinet shares offer over the portfolio’s intrinsic value — especially since the plunge in the value of shares in the group’s core British American Tobacco (BAT) investment. Others reckon Reinet would do better to mobilise its balance sheet to acquire more shares in BAT — which provides excellent dividend flows — directly.

Others are indifferent, but bemoan the fact that Reinet never took the opportunity to lighten up its BAT shareholding when the price was markedly higher. Since listing in 2008, the group has twice sold off parcels of BAT shares.

Perhaps a decision not to buy more shares in BAT does tacitly acknowledge the need for Reinet’s investment portfolio to be more balanced. Even at the snuffed-out share price, the BAT holding still accounts for about 60% of Reinet’s portfolio value. Recently

Reinet’s investment in Uk-based financial services specialist Pension Insurance Corp (Penscorp) has come to the fore, and now ranks as the secondbiggest holding in the portfolio. Penscorp is a steady rather than spectacular grower, but substantial value could be unlocked if this specialist business is listed on the London Stock Exchange, or bought by a larger financial services grouping. So far there has been no official word in either regard. Unfortunately, most of Reinet’s tilts at other investment funds have not looked particularly inspiring — which won’t help the group shake its tag as a proxy for BAT.

Others are indifferent, but bemoan the fact that Reinet never took the opportunity to lighten up its BAT shareholding