Solv­ing the ‘NAV’ enigma

Finweek English Edition - - Companies & markets - FROM THE AN­NUAL RE­PORT MARC HASENFUSS

COM­MENTS in Sekunjalo In­vest­ment Group’s an­nual re­port show that find­ing the proper value for this em­pow­er­ment counter is rather im­por­tant. Chair­man and CEO Iqbal Surve notes in his an­nual re­view: “Our vi­sion of be­ing a con­glom­er­ate in­volves build­ing strong di­vi­sions that can be listed. This will en­able us to un­lock value and to pro­vide share­hold­ers with an op­por­tu­nity to in­vest in fo­cused di­vi­sions or the con­glom­er­ate’s top struc­ture.”

It’s quite clear that Sekunjalo’s tech­nol­ogy in­ter­ests and its biotech sub­sidiary, Bio­clones, will be par­tially spun off and listed in the short to medium term. Pre­sum­ably health­care, fi­nan­cial ser­vices and other fo­cus ar­eas will fol­low later once crit­i­cal mass and sus­tain­able prof­itabil­ity are se­cured.

With those value-un­lock­ing ex­er­cises afoot, the im­por­tance of Sekunjalo’s net as­set value (NAV) be­comes all the more im­por­tant. The an­nual re­port again shows two fig­ures: R365m (or 101c/share) for the group NAV and R903m (or 250c/share) for the com­pany NAV.

The ar­gu­ment is re­ally that group NAV shows as­sets at a more con­ser­va­tive value, while the com­pany NAV re­flects the direc­tors’ val­u­a­tion of in­vest­ments and as­sets. In other words, the group bal­ance sheet shows in­vest­ments in prop­erty, plant, equip­ment, bi­o­log­i­cal as­sets, good­will, trade­marks and phar­ma­ceu­ti­cal dossiers as well as other in­vest­ments – col­lec­tively val­ued at around R470m. The com­pany bal­ance sheet shows none of those but claims that in­vest­ments in sub­sidiaries hold more than R800m in value.

The mar­ket will only prove the value of the in­vest­ments once the first few di­vi­sions are par­tially spun off and sep­a­rately listed.

Mean­while, in­vestors have to de­cide whether Sekunjalo is rea­son­ably priced at cur­rent mar­ket val­ues against the group NAV or priced at bar­gain base­ment lev­els against the more “lib­eral” com­pany NAV.

It’s a tough one. But in­vestors de­ter­mined to solve the “NAV” enigma have a 172-page an­nual re­port to plough through.

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