The ‘easy access point’ to billionaire Johann Rupert’s South African bounty

Remgro looks compelling from an investment perspective despite recent struggles faced by the group.

Remgro is an investment holding company that is Chaired by South Africa’s richest man, Johann Rupert.

The group holds all the local assets from the spin-off of Rembrandt by Rupert in 1988, where the international assets were transferred to Richemont.

Although Richemont (market cap of R18 trillion) and Reinet (market cap of R90 billion) are the largest companies that Rupert has a large stake in, Remgro (market cap of R78 billion) still offers strong value for investors.

Chantal Marx from FNB Wealth and Investments said that Remgro is one of the easiest points of entry into “SA Inc.” as it invests in a variety of companies with heavy exposure to the South African economy.

The group’s most notable investments include Mediclinic, OUTsurance, FirstRand, Discovery and RCL Foods.

It also stakes in the Vodacom Bulls, Vumatel-owner CIVH, Seacom, Momentum Metropolitan and many more.

Marx noted that there has been a lot of corporate activity in the portfolio over the last few years with the delisting of Mediclinic, the delisting of Distell and investment in the newly formed Heineken SA.

The group also saw Rainbow unbundled from RCL Foods, while there was also a simplification of the RMH and OUTsurance structures.

Another highly reported change of the portfolio looks at CIVH trying to merge its fibre assets with that of Vodacom to grow scale and make business more operationally viable following heavy investment.

However, the deal has faced regulatory challenges, with the Competition Tribunal blocking the deal following a recommendation from the Competition Tribunal.

The over R13 billion deal is being appealed by Vodacom and has also received support from Trade and Competition Minister Parks Tau.

Tough times, but there’s value

Marx said that the full-year results to the end of June 2024 were uninspiring and perhaps a reflection of the subdued economic conditions over the previous year.

She added that the corporate activity undertaken will likely require “bedding down” to a certain extent.

Remgro’s headline earnings were down by 20% from R7,056 million to R5,647 million for the year ended June 2024.

A major driver of the decline in headline earnings is the effect of corporate actions, several of which were non-recurring items. These actions amounted to a cost of R766 million over the period.

The challenging economic environment and Heineken Beverages’ R297 million loss also contributed to the drop in headline earnings.

On a more positive note, there were increased contributions from several investee companies.

This included RCL Foods Limited, OUTsurance Group Limited, Siqalo Foods Proprietary Limited and Air Products South Africa Proprietary Limited.

Marx noted that Remgro is trading at a discount to NAV of about 48%, which was expanded from the full-year mark (FY24: 46%, FY23: 40.8%)

She said that the stock looks compelling against an average discount to NAV of 28% historically.