It’s now time for Reinet to beef up the portfolio

It may be mere coincidence, but Reinet’s announcement that it is taking steps to improve liquidity in its shares was met with a 2.7% rally in the stock on Tuesday, while the performance of its main asset — British American Tobacco — was a far more subdued 0.4%.

The investment creation of Johann Rupert has embarked on a share clean-up that will see it apply for admission to Euronext Amsterdam, in addition to its Luxembourg listing, and put in place a simplified structure to help boost cross-border trading in Reinet Luxembourg shares between investors on the Luxembourg exchange, Euronext Amsterdam and the JSE.

But while liquidity may be top of mind for Reinet CEO Wilhelm van Zyl, that’s probably not why the share price has lagged that of its principal asset since it was listed in October 2008.

Set against British American Tobacco and excluding dividends, Reinet produced a return of 135% over the period. British American Tobacco, on the other hand, has delivered 219%, excluding dividends, over the same time frame.

While it’s natural for investment holding companies to trade at a discount to their underlying assets, the sluggish pace at which Reinet has moved in assembling a bigger portfolio – while drawing a management fee — is probably the biggest problem with the stock.

Its universe of possibilities, according to its website, is vast: listed and unlisted equities, bonds, real estate and derivatives — yet British American Tobacco still, nine years on, accounted for 70.8% of its net asset value as of the year ended March. That’s followed by the UK’s Pension Corporation — worth 19.6% of net asset — and its private equity interests at 13% of net asset value. Time for some fresh deals?

WG Wearne, one of SA’s oldest construction groups, had its listing on the JSE suspended with immediate effect this week after failing to submit its annual financial statements within the six-month period stipulated by listings requirements.

The group said on Tuesday in a stock exchange announcement that the annual financial statements were “not released timeously due to administrative issues”. It did not elaborate.

Starting out in 1910 as a small family business and listing on the AltX in 2006, it operates in some of SA’s major metropolitan areas. The group is still led by a family member, selling aggregates, ready-mix concrete and mobile crushing and screening services to much bigger JSE-listed construction companies.

The mostly poor performance of SA’s construction sector since the end of the 2010 Soccer World Cup has obviously weighed heavily on the firm. Much of this can be blamed on the global financial crisis, but also the appalling lack of spend on big infrastructure projects by SA’s government since then.

It has been a difficult past nine years for WG Wearne. The share price was about R5.50 in late 2008, but collapsed to under R1 by the beginning of 2009. It then traded down to less than 5c per share from 2013, closing at 13c on Monday.

Grant Thornton has flagged “material uncertainty” regarding the group as a going concern.

In its annual results to February 2017, the group incurred a headline loss of R46.1m and the auditor said that current liabilities exceeded current assets by R207m.

After all this time, it would be a brave person who sees any way back for the group.