Remgro is an investment holding company that is currently undergoing a major asset base restructuring. This entails spinning off listed investments as the company aims to reduce its investments in JSE listed shares and focus on unlisted businesses. The Remgro board, led by billionaire Johan Rupert, believes that this change in strategy will unlock the underlying value, which currently has a discount of around 40%, and simplify the business model. The spinoff of listed shares, such as Grindrod, Grindrod Shipping, most of the holdings in FirstRand shares, and additional corporate activities such as the unbundling of RMI assets, which resulted in the Outsurance listing, has had a positive impact on Remgro’s results.
According to the directors, value unlock opportunities have been delayed due to the slow pace of the authorities’ approval of the requisite transactions. CEO Jannie Durand attributes this to a trust deficit with the government. Examples of such delays include the major delays in the approval of the buyouts of minorities in the Distell Group by Heineken, as well as the buyout of minority shareholders and delisting of Mediclinic shares, which seem to be on track for approval.
The bright spot in the group has been the earnings of its investment in the CIVH Group, a dominant player in the home fibre markets, with earnings up tenfold, having shaken off previous years’ losses. The Vumatel unit has now connected more than 2 million homes, benefiting from the scale of operations resulting from large-scale investments in the company, with potential growth in untapped markets.
Remgro declared an interim dividend of 80c per share, an increase of 50% from the previous interim period in December 2022. However, the group should be seen as a NAV play, with intrinsic NAV increasing from R213.10 to the current R223.86 in December 2022.
The strong balance sheet reflects cash of R14bn and money market assets of R73bn, with new ventures such as the Energy Exchange and further corporate initiatives gaining momentum in the next reporting period. This should prove to be a sound investment for patient investors in this high-quality share.
By Ron Klipin