Finweek English Edition - - Companies & markets - MICHAEL COUL­SON

WHEN I USED TO IN­TER­VIEW RMB Hold­ings chair­man G T Fer­reira on SAfm Mar­ket Up­date, a stan­dard ques­tion was why keep a sep­a­rate list­ing for what was lit­tle more than a div­i­dend fun­nel for the con­trol­ling in­ter­est in FirstRand. This al­ways evoked the stan­dard re­ply that even if the in­ter­est in FirstRand was stripped out, RMBH was still a com­pany with net as­sets of more than R2bn.

And so it still is. The hold­ing in FirstRand is a mas­sive 94% of to­tal net in­trin­sic value, though a less over­whelm­ing 87% of head­line earn­ings. The dif­fer­ence is ex­plained by the high re­turn on as­sets of short-term in­sur­ance sub­sidiary OUT­surance. OP­POR­TU­NI­TIES • RMB Hold­ings yields 3,7%, against only 3,2% on a di­rect in­vest­ment in FirstRand. Ex­pressed an­other way, the mar­ket cap of RMB Hold­ings is less than the value of its stake in FirstRand. Though this dis­count has per­sisted for years and is com­mon for com­pa­nies of this na­ture, even if it con­tin­ues, in­vestors may pre­fer to take ad­van­tage of the higher yield. • Though it may be a mi­nor per­cent­age of as­sets, the only way to in­vest in the suc­cess­ful OUT­surance busi­ness is through RMB Hold­ings. At some stage the present struc­ture could change, with a view to re­al­is­ing the po­ten­tial from un­bundling the FirstRand stake or list­ing OUT­surance in­de­pen­dently. RISKS • Though trad­ing vol­umes in both shares are rea­son­ably

high, FirstRand is def­i­nitely the more liq­uid.


Source: I-Net Bridge

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