Rupert stable starting to stumble
Investors uneasy about returns after unbundlings
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.