Ru­pert sta­ble start­ing to stum­ble

In­vestors un­easy about re­turns af­ter un­bundlings

Finweek English Edition - - COMPANIES&MARKETS - VIC DE KLERK

SHARES IN THE old Rem­brandt Group – let’s call it the Ru­pert sta­ble – usu­ally out­per­formed the Top 40 in­dex com­fort­ably in the past. That’s also why the larger group also of­ten had the sta­tus of be­ing South Africa’s best buy-and­hold share. But it looks as if the prices of some of its un­bun­dled shares are now bog­ging down a bit. The Sa­trix 40, thanks to its far bet­ter dis­tri­bu­tion, may per­haps be tak­ing over that role of best buy-and-hold in­vest­ment.

Since its un­bundling out of Remgro and Richemont late in 2008, Bri­tish Amer­i­can To­bacco has per­formed pretty poorly, mea­sured in terms of cap­i­tal gain. But even so, with a div­i­dend yield of al­most 5%/year in Bri­tish pounds it’s still a far bet­ter in­vest­ment than Bri­tish gov­ern­ment bonds (gilts) or a ster­ling de­posit on an is­land some­where for all those South Africans so fond of tak­ing refuge in some re­mote lo­ca­tion. For the year 2011 to date – that isn’t even four months – its share price has risen 3,8%, while a healthy div­i­dend of 935c/share (or 3,1%) has al­ready been de­clared and will be paid early in May. The to­tal re­turn of 6,9% for share­hold­ers in just less than four months is cer­tainly bet­ter than the money mar­ket could of­fer.

Else­where in the Ru­pert sta­ble, only Rain­bow Chicken Ltd has re­warded share­hold­ers in any way this year to date. The poul­try farm’s share price is al­ready up by 5% this year and a mod­est div­i­dend of 1,6% pushes the re­turn up to 6,6%. Remgro has so far this year de­clared only a very itsy-bitsy div­i­dend of 101c/ share. Its price is cur­rently lan­guish­ing at around R110, which is slightly lower than last year’s kick­off price of R114/share. The money mar­ket was bet­ter.

Richemont has on sev­eral oc­ca­sions said things are cur­rently go­ing con­sid­er­ably bet­ter with it than in the dark days fol­low­ing the fi­nan­cial cri­sis of 2008. How­ever, the Ja­panese mar­ket is a large one for this pro­ducer of lux­ury goods – as much as 14% of its profit de­rives from that coun­try. Prospects in Ja­pan still don’t look very good. Richemont’s share price is now only about the same as it was a year ago – and no div­i­dend has yet been paid this year.

Reinet’s big­gest as­set is still its in­vest­ment in BAT. But un­like an or­di­nary hold­ing com­pany, Reinet prefers not to pass the div­i­dend it re­ceives from BAT on to its own share­hold­ers. Then there’s also still the 10% man­age­ment fee payable to Ru­pert’s as­set man­agers on the in­crease in value in Reinet. Those two as­pects, to­gether with the ab­sence of any dar­ing new in­vest­ments, are start­ing to make share­hold­ers feel rather un­easy.

How­ever, the cur­rent un­der­achieve­ment of shares in the old Rem­brandt Group isn’t so bad that in­vestors have to turn away com­pletely to seek greener pas­tures else­where. Over the year to date, Sa­trix 40’s share price has also only in­creased by a mod­est 3% and the div­i­dend to be paid soon will be just over 0,5%. Noth­ing won­der­ful, but still bet­ter than putting money out on de­posit.

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