Buy the experts
INVESTORS LOOKING TO PICK quality investments in the currently uncertain climate need to look carefully where they place their money. The global financial markets – South Africa’s included – may have seen some respite over the past few weeks but the credit crisis is far from over and necessitates skilled stock pickers.
While the bloodbath over the past couple of months resulted in enormous value destruction, those investors sitting with cash (and who look carefully before they buy) stand to benefit massively from the current valuations over the long term.
The fact private equity player Brait SA has seen its assets under management decline 12% in the interim period to September, shows even the experts can’t always accurately predict the market. A “disappointing” performance has seen R1,5bn withdrawals from the mature Brait Absolute Fund, which brought current assets under management to R10,2bn in the interim period to September. It still earns management fees on that.
Brait itself has suffered from the rout, with its price coming off 53% from its 2900c/share this time last year. That came dangerously close to its net asset value of 1407c/share. Headline earnings decreased 46% to R72,7m over the period. That gives Brait a healthy forward earnings multiple of less than eight times. The 51% increase in interim dividend gives it a forward dividend yield of 11,71%.
CE Anthony Ball says it’s ahead of its investment schedule on the R6,1bn Brait Fund IV, with about half the amount still looking for a home. In the current equity environment that will go a long way. The company invests clients’ monies in mainly infrastructure and industrial assets while it also takes proprietary minority stakes alongside those clients.
Both I-Net Bridge and McGregor BFA agree the share is a buy at the current 1530c/share. Investors who buy at that level will be getting the private equity industry expertise that has made Brait one of SA’s largest players while getting exposure to the millions of US dollars irrevocably committed to the Brait IV fund.