Remgro
This stalwart investment company — headed by the unwilling poster boy for white minority capital, Johann Rupert — offers a diversified portfolio that spans health care, financial services, food and beverages, logistics, technology and venture capital.
Analysts point out that Remgro not only offers a compelling discount on the portfolio’s intrinsic value, but the assets have also been marked down. This includes private hospitals group Mediclinic International, banking group FirstRand, food conglomerate RCL Foods and liquor group Distell. Investors get access to a top-rated, if conservative, management team, a decent smattering of offshore earnings and a strong balance sheet.
n a p:e ratio of 16 and dividend yield of 2.1%, it’s looking pretty good value.
Alternative: HCI
Peregrine
Mergence Investment Managers’ Brad Preston says this financial services company is worth a closer look.
“Peregrine has sold off recently, based on their announcement that while their underlying operating result will be good at their next results, earnings will be hurt by weak share price moves from their holdings in Consolidated Infrastructure and StenProp.”
Peregrine could benefit from value-unlocking initiatives or corporate action in the short term, leaving the company focused on its core financial services business. A number of Peregrine’s specialist offerings — like its hedge fund business — could benefit from market volatility, while assets under management, held by safety-first styled subsidiary Citadel, probably won’t be rocked by market ructions. It trades on a p:e of 9.3 and a dividend yield of 5.7%.
Alternative: JSE Ltd
Tongaat Hulett
This stalwart agribusiness can generate sweet returns as prospects are not necessarily soured by the recent economic setbacks for SA.
“The drought lifting is a ‘downgrade-agnostic’ event ... The weather does not care what rating agencies say,” says fund manager says Keith McLachlan, who points out that sugar revenues are dollar-priced and buoyed by a weaker rand. “Even if domestic consumption drops, Tongaat can easily swing into export markets,” he says.
The share is trading on a modest forward earnings multiple of 9.9, and though the share price has recovered from the 2015 lows of around R90, there is some way to go before the late 2014 levels of more than R170 are reached again. Analysts’ consensus is that it is a “buy”.
Alternative: Crookes Brothers
Oceana Group
This superbly managed seafood conglomerate is even more attractive since the share price shed 10.4% in the past month. This leaves it on a p:e ratio of 14 and a dividend yield of 4.6%.
It is the canned pilchards leader through Lucky Star — a protein staple in many SA households. Crucially, the Lucky Star business is not quota dependent, which means Oceana is less vulnerable in the upcoming fishing rights allocations.
The recent offshore acquisition of Daybrook Fisheries — a fish oil and fishmeal specialist in Louisiana — looks promising for the longer term in spite of some challenging trading conditions. If anchor shareholder Tiger Brands gives way to an empowerment partner, Oceana may trawl more smoothly in local waters in the years ahead.
Alternatives: Sea Harvest and Premier Fishing
Datatec
Preston believes the market is underestimating this technology conglomerate. The company is a rand-hedge counter that, until the recent release of a detailed cautionary, lagged the recent sell-off in the rand.
The share has moved up 7% in the past week after an announcement that it has received an offer for part of its US-based Westcon business.
Preston says Westcon is valued at US$800m (R11.1bn), but Datatec’s entire market capitalisation before the cautionary was only $820m (R10.6bn). Preston estimates that Westcon makes up about half of Datatec’s earnings.
“So they are potentially selling half of their distribution business for almost the market cap that the whole business is trading at. What’s more, the remaining business, Logicalis, is a technology services business which generally has a higher margin than the distribution business.”
Its current p:e of 26 might seem pricey, but on a one-year projection, this drops to 12.2. Factor in the Westcon deal and it’s a buy.
Alternative: PBT Group
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