Coronation now owns 15 percent of Hosken

CORONATION Fund Managers has increased its shareholding in empowerment investment firm Hosken Consolidated Investments (HCI) to 15.08 percent by acquiring ordinary shares in the company.

Coronation is now the second-biggest shareholder in HCI. The South African Clothing and Textile Workers Union holds 36.71 percent.

Coronation increased its shareholding in HCI from 1.07 percent to 5.48 percent at the beginning of this year.

“The most compelling reason to buy HCI is for its holding in Tsogo Sun, which makes up the majority of its net asset value. Based on valuation multiples, buying into HCI provides a cheaper entry into Tsogo Sun, due to the discount afforded to holding companies to their net asset values,” Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said.

She added: “Coronation likely has an investment case regarding the unlocking of the value of Tsogo Sun, which trades below its intrinsic value, and have chosen to make the investment through HCI, rather than owning Tsogo Sun directly. The remainder of the assets in HCI are far less attractive compared to the Tsogo Sun holding.”

HCI, which is worth more than R12 billion, has a 43-percent controlling stake in Tsogo Sun.

In September 2016, Tsogo Sun and Hospitality Property Fund (HPF) announced a merger between the two companies. As part of the transaction, Tsogo Sun acquired a controlling stake in Hospitality by vending a portfolio of 10 hotel properties in exchange for the issue of Hospitality ordinary shares.

Coronation’s shares rose 0.29 percent on the JSE to close at R68.11 yesterday. HCI was up 2.69 percent to close at R133.50.