Dif­fer­ent dis­clo­sure needed

Finweek English Edition - - Openers -

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%).

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