Bi­ased to­wards per­for­mance

Finweek English Edition - - Companies & markets - MICHAEL COUL­SON

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.

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