Biased towards performance
FORMED IN 1987 as a pyramid company for SA Bias Binding and run by one of South Africa’s shrewdest investors – Christopher Seabrooke – Sabvest has built up a small but select investment portfolio and also acts as a corporate adviser. In both capacities it was involved in the recent reconstruction of Metrofile.
Of the 31 December portfolio – with a carrying value of R231m – R176m is classified as investments in associates and R55m (up from R11m the year before) as long-term investments. SA Bias remains the largest associate, with a carrying value of R117m.
Realisation of Metrofile debt was a major reason for a leap in net cash last year from a negative R5,2m to R33,5m. That was despite buying 350 000 shares in Datatec (taking that holding to 500 000 shares worth R16,6m) and 225 000 Massmart (taking that stake to 300 000 worth R21,1m). The 21,2m shares held in the restructured Metrofile are worth R17,4m.
Since 2001, headline earnings per share have risen from 24,3c to 183c, dividends from zero to 12c and tangible NAV from 348c (with unlisted investments at directors’ valuation) to 905c.
Sabvest says 2006 earnings included a number of one-off profits, which are unfortunately not quantified. Consequently, earnings in 2007 are likely to be lower but NAV should continue to grow and dividends at least be maintained. Perhaps the best indicator of progress is that intrinsic NAV has shown a five-year compound growth rate of 22,5%.
However, Sabvest is only “human”. Apart from the near-fatal problems at Metrofile, another associate that has had problems is Set Point Technology, in which there’s a 14,8% holding with a carrying value of R17,9m. Set Point, hit by serious fraud, was the only poorly performing investment last year but is expected to return to “sound” profitability in 2007.
At 850c, Sabvest ordinaries are at only a 6% discount to NAV. For investors not worried about lack of voting rights, the N shares at 740c offer an 18% discount. Moreover, NAV should now be higher than at 31 December, as all its listed investments – except Metrofile – have since shown useful gains.
With a market cap of only around R360m, Sabvest isn’t an institutional stock. But a small investor who can pick up small parcels that come on offer shouldn’t regret it.