Compelling on paper, but in a slow market

he discount the share prices of many investment companies offer to the sum-of-the-parts of their portfolios often provides much intrigue for market watchers, especially when that discount is particularly large.

Everybody loves a bargain, and when a big discount can even mean access to assets for free, punters can get excited.

The problem with investment trusts is that most are structured for the long haul. The primary aims would be to secure solid (above average) and sustainable long-term returns from a well-diversified basket of investments capable of generating sufficient cash flows to underpin a consistent dividend policy.

Unlocking value is often not foremost on the minds of directors or prime movers of investment trusts.

Though Trematon is one of

Tthe smallest investment companies on the JSE, the discount placed by the market on its underlying investments is one of the largest. At the time of writing Trematon was trundling along at 276c on the exchange. It represents a more than 40% discount on the stated intrinsic NAV as at the end of February of 482c a share.

The big discount is curious, since Trematon’s value is underpinned by a slab of conservatively valued property investments in the form of the Club Mykonos Langebaan resort, Aria Property Group, the Resi Investment Group and other residential property ventures. The collective value of the property holdings is R538m — which is just over half of the roughly R1bn valuation placed on Trematon’s entire portfolio.

These property investments equate to around 250c a share, which is a serious chunk of the