Bet­ter the Mvela you know…

Finweek English Edition - - Companies & markets - MARC HASENFUSS

MORE THAN 20% OF Mve­laphanda Group’s in­trin­sic net as­set value (NAV) com­prises cash, a sit­u­a­tion more be­fit­ting an “old” in­vest­ment trust like Rem­gro than a youth­ful em­pow­er­ment con­tender de­ter­mined to build value through deal flow.

In fair­ness to Mvela, the group has not been sit­ting on the cash for long – hav­ing only re­cently sold off its hold­ing in Mve­laphanda Re­sources for a rather nifty gross of R1,18bn.

Still net cash of R1,4bn will sit rather com­fort­ably in Mvela’s pock­ets, par­tic­u­larly while a bout of jit­ters on the JSE could shake out a few new in­vest­ment op­por­tu­ni­ties. With full year cash flow likely to top the R250m mark (that’s op­er­a­tional cash flow from the ser­vices busi­nesses pre­vi­ously housed un­der Reb­serve), Mvela – as­sum­ing no new in­vest­ments of sig­nif­i­cance are made – could fin­ish the year with more than R1,5bn in net cash. That’s equiv­a­lent to around 300c/share!

Aside from the hefty cash un­der­pin, Mvela’s NAV com­prises its stakes in bank­ing group Absa (worth around 337c/share), private hos­pi­tals group Life Health­care (246c/share), the old Reb­serve op­er­a­tions (394c/ share) and con­struc­tion group Group Five (48c/share).

In other words, at the cur­rent share price, the mar­ket is only valu­ing Mvela at the col­lec­tive value of its in­vest­ments and op­er­a­tions as at 31 De­cem­ber 2006. The not in­sub­stan­tial cash pile is al­most en­tirely dis­counted.

Mvela’s end-De­cem­ber 2006 NAV is stated as 1305c (mea­sured against a share price of around 1080c at the time of go­ing to press). But Mvela also pro­vides an up­dated NAV of 1407c/share as at 23 Fe­bru­ary 2007.

Mea­sured against the Fe­bru­ary NAV, the cur­rent share price shows the mar­ket dis­count­ing Mvela’s shares by be­tween 20% and 25%.

Even af­ter tak­ing into ac­count cur­rent mar­ket jit­ters there’s lit­tle doubt Mvela’s shares are rep­re­sent­ing good value – es­pe­cially since some em­pow­er­ment in­vest­ment com­pa­nies ac­tu­ally trade at a pre­mium to NAV.

With solid long-term in­vest­ments, am­ple cash, a sound op­er­a­tional core and a new (and prob­a­bly more ad­ven­tur­ous) CEO in place, we reckon Mvela can be ac­cu­mu­lated with some vigour – es­pe­cially dur­ing bouts of mar­ket weak­ness.

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