Better the Mvela you know…
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.