Different disclosure needed
THE PUBLIC INVESTMENT CORPORATION – South Africa’s biggest single investor – doesn’t exactly go out of its way to make its annual report an interesting and relevant read. There are plenty of reviews and reports of the year’s activities but it’s mostly harmless guff, considering the PIC closed its financial year-end in March this year.
The breakdown of the R720bn assets under its management as at end-March is vaguely intriguing – showing equities accounting for 48% of the total, capital markets 33%, 10% in the money markets and the Isibaya empowerment fund 3%. Cash, properties and structured investment products make up the remaining 6% in equal proportions.
Finweek would have hoped the PIC’s annual report would give a tad more detail on the composition and breakdown of the core equity portfolio. We’re told equities managed by the PIC outperformed its benchmark by delivering a total return of 8,71%. The PIC says that performance reflected high weightings in resources – citing BHP Billiton, Anglo American, Impala Platinum and Anglo Platinum (as well as industrial heavyweights SABMiller and Richemont) as top performing stocks.
However, the problem is that the PIC details its individual equity holdings not by market capitalisation but rather by the percentage holding in each company. That effectively means the entire top performing stocks cited in the preceding paragraph aren’t reflected on the list of the PIC’s top 40 listed holdings. In its top 40 we have relatively small holdings, such as PIC’s 31,28% stake in SA Corporate Real Estate, its 11,76% interest in Purple Capital, its 12,56% holding in Business Connexion and a 13,81% stake in Super Group. Collectively, those “large” stakes probably don’t even amount to 5% of the PIC’s equity portfolio at end-March 2008.
It would, Finweek contends, be far more illuminating (especially for outside shareholders and investors in general) if the PIC published its equity holdings ranked according to value. The current format simply doesn’t reflect the true composition of the PIC’s equity portfolio.
Gripes aside, the PIC’s annual report does give some indication of how its investment managers are thinking in terms of equity selection. Looking back at its 2007 annual report it’s clear the PIC has taken a strong view on Shoprite Holdings and New Clicks (in which it holds stakes of 12,5% and 13% respectively).
The PIC also bumped up its stake in furniture retailer Lewis from 16,23% to 19,93% but reduced holdings in JD Group (down from 15,67% to 12,28%), Truworths International (13,45% to 11,27%), Woolworths (15,6% to 11,77%). Spar (last year 9,27%) and Ellerine (11,75% in 2007) have fallen off the PIC’s top 40 list in 2008 – while Mondi, Group Five and Sentula Mining are the new entrants to its rankings.
Aside from a well documented shift into property (SA Corporate Real Estate, Growthpoint Properties, Acucap and CBS Property) the PIC also reinforced its stakes in construction and engineering giant Murray & Roberts (up from 11,54% in 2007 to 14,83%), life assurance group Metropolitan Life (up from 10,83% to 14,79%), building supplies specialist Illiad Africa (11% to 12,12%), poultry producer Astral Foods (9,28% to 11,28%) and private equity group Brait (10,28% to 12,5%).