The sheer size of a nearly R11bn quarterly gain in Reinet’s net asset value (NAV) might raise a few eyebrows in the market. On Wednesday, the Rupert family-controlled investment company reported an NAV of €5.5bn (R88bn) for the quarter ending December — a sprightly gain of €684m over the quarter to end-September.
With Reinet not releasing a detailed breakdown of the NAV, it seems safe to assume that the 14% gain was largely driven by Reinet’s shareholding in British American Tobacco (BAT). The BAT share price increased about 11% between end-September and end-December last year on the London Stock Exchange … and there would have been a generous quarterly dividend to boot.
Shareholders will hope the gain in BAT was at least matched by further growth in Pension Insurance Corporation, the UK-based financial services business that ranks as Reinet’s second-largest investment. Only in recent years has BAT’s portfolio dominance dissipated, and at last count had represented less than 50% of total NAV.
For value-seeking investors, Reinet — which aims to preserve capital rather than take risks — remains an intriguing prospect. The latest NAV translates into roughly R450 a share compared with a share price of about R292.
This means Reinet, which has just completed an aggressive share buy-back exercise, is trading at a gaping 35% discount on the updated NAV estimate.
With little prospect of any dramatic unlocking of value, the discount is likely to remain wide for the foreseeable future. Perhaps the only way to narrow the discount is to pay out more generous dividends — possibly even contemplating an interim payout policy.
The Competition Commission’s beef with I&J
I&J’s collusion case at the Competition Tribunal is edging closer to finalisation after the food manufacturer and the Competition Commission made their closing arguments this week.
The commission has alleged that I&J and Karan Beef engaged in collusion between 2000 and 2015.
I&J and Karan found themselves entwined in 2000 when I&J could no longer produce processed beef products following the sale of its Springs processing plant to McCain. Around the same time, Karan wanted out of retail because it was struggling to get its beef burger patties to market.
So in a match made in heaven, the two companies sealed a manufacturing agreement in June 2000 that saw Karan manufacture I&J and Karan brands. According to the commission, this agreement precluded Karan from selling into the food service market.
It is the commission’s contention that the agreement is collusive in nature because it amounts to division of markets. I&J disputes this.
As things stand, a lot depends on whether the inclusion of “house-branded products” in the agreement was a genuine error, as I&J asserts. The commission has argued that the inclusion meant Karan could not supply house-branded products to retailers such as Pick n Pay.
I&J says the inclusion of the phrase was an honest mistake and there was no intention to stop Karan Beef from supplying house brands. Predictably, the commission has not entertained the I&J claim. Doing so would weaken its case, which is solely based on the manufacturing agreement and its amendment.
It remains to be seen if I&J has made a compelling enough argument to convince the tribunal that including house-branded products in the agreement was an error.
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