Investment holding company Sabvest Capital, run by the well-regarded Christopher Seabrooke, is well known to readers of IM, which has consistently recommended the stock.
IM’s previous article in May 2024, with the counter at R65.22, commented on the “one-time blip” to the 2024 financial results due to selected assets having a softer period, but IM expected a swift recovery and maintained its buy recommendation.
At the time of writing, Sabvest was trading at R99.53, generating a healthy return of 53%. It is predominantly an investment vehicle with a range of investments in unlisted assets, where 94% of the R5.4bn fund is invested in what could be considered private equity assets. At the 2024 results, Sabvest reported NAV of R132.13 a share, a year-on-year increase of 20.8%, placing the counter on a discount of 25%.
After the soft financial 2023 — when NAV growth was only 0.7% to R109.36 a share — 2024 brought better days. The valuation of international labelling business ITL rose from R499.3m to R722.1m (up 45%), which followed on from a 25.4% increase at Sabvest’s interim results stage.
After a period of underperformance, new management was installed at ITL, and an optimisation of that company boosted in NAV. This is expected to continue into 2025.
A surge in UK-listed tech security company Corero Network Security (up 169%) — alongside consistent performances from other major assets including Apex Partners Holdings, Masimong and ARB Holdings — helped the increase in group NAV.
The main feature of the fund in the past 12 months was the streamlining of the portfolio via asset sales alongside the rapid repayment of group debt. In the year, Sabvest sold its interests in Rolfes Holdings (R194m) and Sunspray (R81m) as well as part of its stakes in Apex (R141m) and long-standing investment Metrofile (R108m). Proceeds were used to reduce debt by 81% to R463m to end the year-end period with debt of R108m and cash in the bank of R53m.
IM believes a period of above-average NAV growth is ahead, with a step up from past growth in the 10%-13% a year to a range closer to 20%
With a much leaner gearing level, Sabvest, seeing the wide discount to NAV, continued its share buyback programme and acquired 850,000 shares at an average price of R70.47 for R60m. That desire to allocate capital judiciously where management sees value opportunity resulted in Sabvest acquiring, in early May, a further 720,000 shares at R94.14 a share for R68m.
The robust belief by management in the inherent prospects of the company is thus obvious, despite Sabvest being near its record trading price.
After the start of the Trump tariff drama, IM asked management if the imposition of aggressive tariffs would affect some of the larger assets, especially those in the global haberdashery and garment label supply segment, namely SA Bias and ITL, which represent 37% of Sabvest’s NAV. The answer was “not materially”.
IM believes a period of above-average NAV growth is ahead, with a step up from past growth in the 10%-13% a year to a range closer to 20%.
From recent meetings, IM understands that much of the portfolio is performing strongly, with prospects for further deals and expansion given the degearing of the company. Looking at some of the larger assets, Apex — the best performer in the portfolio since its acquisition (value R607m) — is in acquisition mode, with its underlying assets also performing strongly.
Sabvest’s second-largest investment, telecoms and technology asset DNI-4PL (value R984m), had a flat year, but its valuation rating ticked higher from 6.5 times to seven, as restructuring of Sabvest’s 19.4% stake brought greater exposure to higher growth-orientated assets and lower concentration risk.
A new portfolio feature was Amicus (value R112m). This is an industrial holdings company (a restructuring and stake sale of the prior Flexo stake) involved in plastic moulding products, in which Sabvest sees significant growth potential.
If IM’s NAV growth assumptions year on year are realised, it’s possible to justify a Sabvest price target of R120 (up 21%) over one year. IM’s long-standing buy recommendation remains.
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