PSG on the prowl for op­por­tu­ni­ties

Fi­nan­cial ser­vices group PSG has been ex­cep­tion­ally good at iden­ti­fy­ing small companies with po­ten­tial and mould­ing them into huge win­ners. CEO Piet Mou­ton’s mes­sage at the com­pany’s re­cent AGM was that in­vestors can ex­pect even more of this.

Finweek English Edition - - THE WEEK IN THE NEWS - By Mar­cia Klein

pSG did not re­ceive the memo that South African business is in a state of stag­na­tion. At its an­nual gen­eral meet­ing (AGM) on 23 June, it an­nounced that two list­ings were in the pipe­line, and that it re­mains in ex­pan­sive mode and on the look­out for high-growth op­por­tu­ni­ties in South Africa.

On 26 June agri­cul­ture and fuel re­tailer and trader Kaap Agri, 39.8%-held by PSG’s agri group Zeder, listed on the JSE, and around Novem­ber Curro’s ter­tiary ed­u­ca­tion spinoff Sta­dio will de­but on the same ex­change.

PSG CEO Piet Mou­ton spoke about the success PSG has had with companies like Curro, Capitec, Zeder and fi­nan­cial ser­vices group PSG Kon­sult, adding that in­vest­ment arm PSG Al­pha is there to find the next big growth in­vest­ment.

“We are long-term in­vestors and we have no fixed exit in mind. We are strong in fi­nan­cial ser­vices, ed­u­ca­tion and food and agri, but what dif­fer­en­ti­ates PSG sig­nif­i­cantly is our abil­ity to invest early in companies and build them with the man­age­ment teams, giv­ing them the free­dom to build their dreams.”

It is hard to fault its strat­egy. PSG Kon­sult started off with a few peo­ple and a big idea, and now has R175bn un­der man­age­ment and boasts a 25% com­pound an­nual head­line earn­ings growth. Capitec, Mou­ton said, “changed back-al­ley mi­crolend­ing” and is now a hugely suc­cess­ful bank. PSG in­vested in Curro when it had three schools. It now has 127 school build­ings ac­com­mo­dat­ing 47 000 learn­ers, a com­pound an­nual growth in head­line earn­ings of 58% since 2012, and a com­pound growth of 42% in value since list­ing in 2011.

‘The best man­age­ment team in the coun­try’

The group’s core in­vest­ments – Capitec, Curro, PSG Kon­sult, and Zeder – “all have the best teams, but low mar­ket shares and ap­pro­pri­ate gear­ing, so there are growth op­por­tu­ni­ties,” Mou­ton said.

The 30%-held Capitec re­mains “the king­maker” in PSG, and in the past year it gained 1.3m clients. Over 10 years, head­line earn­ings have grown at a com­pound rate of 37% a year and net trans­ac­tion fees by 60%.

“We love this in­vest­ment,” Mou­ton said. “It has by far the best man­age­ment team in the coun­try.” It has rel­a­tively low mar­ket share, par­tic­u­larly with higher in­come clients. “With the launch of its credit card, we be­lieve there is sig­nif­i­cant growth [po­ten­tial] in bank­ing and lend­ing.”

PSG be­lieves in en­ter­ing new mar­kets with smaller in­vest­ments. Bor­row­ing from Capitec founder Michiel le Roux, who had said Capitec would “ei­ther be a big success or a small fail­ure”, Mou­ton said the PSG strat­egy of in­vest­ing small means that “if it fails, it fails small – and if it makes it, it makes it big”.

With R1.7bn cash on hand, PSG is ex­plor­ing one or two such in­vest­ments.

Some of its smaller in­vest­ments have fared well. Fu­tureLearn, which is in home ed­u­ca­tion and tu­tor­ing, has 17 000 learn­ers and is grow­ing. ITSI, in dig­i­tal learn­ing tech­nolo­gies, al­ready serves 74 000 learn­ers in 180 schools and is ex­pand­ing in the UK, UAE and Aus­tralia.

Stel­len­bosch Nanofiber Com­pany has the abil­ity to in­crease the speed of nanofi­bre pro­duc­tion at a frac­tion of the cost and is hop­ing to make in­roads into the health­care and en­ergy sectors.

Growth po­ten­tial

One of the group’s in­vest­ments which may have sig­nif­i­cant growth po­ten­tial is ter­tiary spinoff Sta­dio, which just made two ac­qui­si­tions in quick suc­ces­sion – the South African School of Mo­tion Pic­ture Medium and Live Per­for­mance (Afda) and South­ern Business School (SBS).

Curro CEO Chris van der Merwe, who re­tires at the end of June and becomes CEO of Sta­dio on 1 July, seems in­tent on repli­cat­ing the Curro growth story again at Sta­dio, which will be­come a “mul­ti­ver­sity”.

“There are a lot of great brands that play in

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.