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Remgro ‘still trading at a significant discount’ – Durand

But share price hits 52-week high as investments in RCL, Distell, TotalEnergies and RMI Holdings boost full-year earnings.
The group is effectively paying out a cash dividend of 90 cents per share for the full-year ended June 30. Image: Supplied

Remgro is still trading at a significant discount to its net asset value (NAV), CEO of the JSE-listed investment holdings giant Jannie Durand told analysts and shareholders during the group’s online results presentation on Wednesday.

Despite posting a stronger set of results for the year ending June 30, as most of its investments in some of SA’s top listed brands recover from the Covid-19 financial fallout, Remgro’s share price continues to trade at a discount.

However, the stock hit a 52-week high on Wednesday, closing almost 3% up at around R130.78 a share on the back of the stronger financial performance.

Durand said the group’s intrinsic NAV had “hardly changed” by the end of the financial year (June 2021) – “still sitting” at a discount “around the 35% level”.

Jannie Durand, CEO of Remgro. Image: Supplied

According to Remgro’s results Sens statement, the group’s intrinsic NAV per share increased by 14.8% from R154.47 at end-June 2020 to R177.33 at end-June 2021.

“The closing share price at 30 June 2021 was R114.60 [2020: R99.90] representing a discount of 35.4% [2020: 35.3%] to the intrinsic NAV,” it further pointed out.

Read: RCL Foods surges to 52-week high as it swings back to profit

With the group’s share price now up more than R15 (a share) since its year-end, the discount to NAV will have reduced.

Dividend

Remgro, which is chaired by dollar billionaire and South Africa’s second richest man Johann Rupert, is effectively paying out a cash dividend of 90 cents per share for the full-year ended June 30.

It declared a final gross dividend of 60 cents (2020: 50 cents) per share out of income reserves.

“The total gross dividend per share for the year ended 30 June 2021 therefore amounts to 90 cents, compared to 265 cents for the year ended 30 June 2020. The final dividend of 2020, as well as the interim and final dividends of 2021, were adjusted downwards to take into account the RMH [RMB Holdings] unbundling during the prior year and the ongoing impact of the Covid-19 pandemic,” the group noted in its results Sens statement.

It nevertheless reported a 66% surge in headline earnings per share (Heps) from continuing operations, to 510.6 cents for its latest financial year.

Heps is the key profit measure for most JSE-listed companies in SA, barring real estate investment trusts.

Recovery

“While the ramifications of the pandemic will still be felt for a long time, Remgro is encouraged by its improved performance compared to the previous financial year,” it said.

“During June 2020, Remgro unbundled its 28.2% interest in RMH … Consequently, the investment in RMH was treated as a discontinued operation for the year ended 30 June 2020.

“For the year under review, earnings and headline earnings measures are again presented for continuing operations and discontinued operations and, accordingly, discontinued operations for the prior year include the equity accounted income of RMH,” it said.

Read:

Remgro reported that headline earnings from continuing operations increased by 66.1% for the year under review (FY21) to just over R2.88 billion, compared to just over R1.7 billion in FY20.

“The headline earnings from continuing operations for the comparative year were significantly impacted, during the second six months to 30 June 2020, by the Covid-19 pandemic and the resultant lockdown measures, as well as by a once-off donation of R500 million to the South African SME Relief Trust,” the group noted.

Investee companies

“From this low base, the increase in headline earnings from continuing operations for the year under review is mainly due to the recovery of the earnings of most of Remgro’s underlying investee companies,” it added.

The group specifically cited the notable performances of RCL Foods, Distell Group Holdings, TotalEnergies Marketing South Africa and Rand Merchant Investment Holdings.

Read:

“This increase is partly offset by a lower contribution from Mediclinic International … [Mediclinic’s contribution includes the full impact of the Covid-19-related lockdown measures on its results for the year ended March 31], as well as lower interest income, due to the 300-basis points reduction in interest rates since January 2020,” Remgro said.

“Furthermore, due to the accounting reclassification of FirstRand Limited from an equity accounted investment to an investment at fair value through other comprehensive income, only dividend income of R191 million was accounted from FirstRand for the year under review, whereas earnings of R657 million were equity accounted in the comparative year,” it added.

Commenting on Remgro’s overall financial performance, Durand said it shows a recovery.

“We are not where we want to be, but at least we are seeing a recovery in our results,” he added.

“A year ago, we announced the worst results in the history of Remgro, largely due to Covid-19. We did not anticipate the impact of the second wave … We hope that we are over the worst [of the pandemic] and the vaccination drive gains momentum.”

Listen to Fifi Peters’s interview with Remgro CFO Neville Williams: 

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Jannie simply can’t stand in Thys’shoes. The 5-year share price is 27% down. It is time for a replacement.

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