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.