Second time lucky?

The relisting of new-look Astoria Investments next week might be an interesting exercise. Readers will remember that RECM & Calibre (RAC) took control of Astoria — originally an offshore investment vehicle — back in 2019.

The offshore interests have since been sold down, and capital has been returned via special dividends. RAC’s plan was to restructure Astoria as a new investment vehicle with a focus on mainly SA assets. So RAC has bundled all its assets — other than its prize gaming business, Goldrush — into the Astoria shell.

RAC shareholders — and I still hold a few of these little beauties — will now receive a distribution of Astoria shares. The “old” RAC, at least to me, was mainly a proxy for Goldrush, a deft little electronic bingo and sports betting business. I suspect RAC will soon change its name to Goldrush Gaming, to reflect its sole remaining investment. My default option would probably be to sell my Astoria share distribution and simply buy more RAC/Goldrush.

RAC’s Astoria-bound assets include specialist retail niches, hapless diamond miner Trans Hex Group and a smattering of education and financial services assets. Hardly inspiring.

But flipping through Astoria’s recent annual report has made me think twice. The report estimates Astoria’s NAV at R387m, or 683c a share. That valuation includes recently acquired newsagent CNA — at zero value! The most tangible value in Astoria can be traced to the small holding in building materials business Afrimat, which is now worth about R70m, or 135c a share.

The market is pretty brutal on investment companies these days, and the big discounts often disregard fringe or smaller investments. So I am going to ignore the value that Astoria accords to its holdings in private education business ISA Carstens (R43m), Trans Hex (R53.5m) and financial services business Vehicle Care Group (R38m). The biggest single holding is a 33% interest in specialist retail hub Outdoor Investments Holdings (OIH), which is valued at R113m, or 30% of NAV. Collectively there is R200m of value in OIH, as well as Afrimat and the small cash balance of R17.5m. This represents almost 400c a share — which might give some guidance when share trading resumes.

Not too shabby

Of course, it will be difficult to suppress sceptical sentiment, with almost 30% of a portfolio sitting in unlisted niche ventures. But OIH does not look — from the smattering of financial information provided — to be a shabby enterprise. OIH has broadened out to hold investments in niche hunting and outdoor retailer Safari Outdoor, hunting and outdoor wholesalers Inyathi Sporting Supplies and Formalito, and a chain of mega pet stores under the brand Family Pet Centre (FPC). Astoria reports that after the lifting of the initial lockdowns, Safari Outdoor saw substantial growth in sales and margins, while Inyathi and Formalito also experienced strong growth in sales with stable margins. FPC continued strong growth in both of its shops in Centurion and Fourways. Pet shops have proved to be a resilient retail niche in recent years, and there is meaningful consolidation in the sector. FPC’s thrust into the mega store niche could pay off handsomely if stores are close to bustling suburban areas where families own pets.

FPC opened a third outlet in December in Silver Lakes, Pretoria, with a fourth store set to open this month. Astoria reckons the concept of a family destination mega pet centre is a viable business — and that FPC has grown to the point where it justifies being a standalone business. For the year ended February 2020, OIH generated profit before interest and tax (PBIT) of R68m, and Astoria indicates the group is on track for PBIT of more than R100m in the year ended February 2021. Hopefully there will be more detail on the OIH and FPC financials in future — enough to determine margins in what will be key growth drivers.

Flipping through Astoria’s recent annual report has made me think twice