Reinet, the offshore investment company headed by Stellenbosch-based tycoon Johann Rupert, is battling to kick its heavy tobacco habit.
A third, quarter management statement released on Wednesday shows Reinet’s long-standing investment in cigarette company British American Tobacco (BAT) still represented a chunky 67.3% of the €5.7bn (R84bn) net value of its investment portfolio at the end of December 2017.
At the end of the September quarter, the 2.97% interest in BAT represented 66.8% of Reinet’s portfolio value.
The BAT investment was again the star performer for Reinet with the cigarette group’s share price increasing on the London Stock Exchange from £46.72 at the end of September to £50.08 at the end of 2017.
In commentary accompanying the management statement, Rupert said the position in BAT was kept under constant review — considering the company’s performance, the industry outlook, cash flows from dividends, stock market performance, volatility and liquidity.
While Reinet’s private equity and specialist investment interests dropped in value to €748m from €779m in the previous quarter, a gain was registered in the value of the group’s second biggest investment, Pension Insurance Corporation (PensCorp). The value of Reinet’s majority stake in UK-based PensCorp — a provider of tailored buyouts and buy-ins to trustees and sponsors of defined benefit pension funds – increased €80m to almost €1.3bn.
PensCorp now represents 22.6% of Reinet’s portfolio. Rupert disclosed that during the quarter under review, PensCorp completed a £115m investment in the Walney Extension Offshore Wind Farm Project.
The company also concluded a pension insurance buy-in with the trustees of the Wolsley Group Retirements Benefits Plan for a premium of £600m, a pension insurance buy-in with the trustees of the Former Registered Dock Workers Pension Fund for a premium of £725m and concluded a pension insurance buy-in with the trustees of three defined benefit pension schemes sponsored by Pirelli UK and Pirelli Tyres for a premium of about £100m.
Rupert said the estimated fair value of the PensCorp investment took into account an estimate of the company’s embedded value as at the end of September and valuation multiples drawn from industry data at the end of 2017.
The estimated fair value reflected an increase in PensCorp’s embedded value, as well as improvements in comparable valuation multiples applied by the market to listed peers in the UK insurance sector, he said.
Reinet’s investment in Trilantic Management and related funds (the old Lehman Brothers investment banking business) was valued at €197m compared to €214m at the end of September. Rupert said the decrease in Trilantic’s estimated value was due to capital distributions received in the quarter of €8m, as well as the weakening of the dollar against the euro.
The market appeared pleased with Reinet’s quarterly performance with the share shifting up over 2% to R272.90.
This means Reinet’s shares on the JSE are discounting the end-December net asset value of R84bn or R43/share by a hefty 35%.
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