Hosken Consolidated Investments (HCI), unlike other investment companies, does not exactly go out of its way to help investors value the underlying portfolio. The latest interim results provide performance measures in the form of revenue, earnings before interest, tax, depreciation and amortisation (ebitda), profit before tax and headline earnings — as well as commentary on the various investments.
But what is not provided is a detailed breakdown of the investment portfolio’s NAV. What HCI refers to as the “net asset carrying value per share” is reflected at R232.60 a share, which means the share price — at the time of writing — was offering a discount of about 25%. That is perhaps relatively palatable, considering that the default investment company, Remgro, has seen a much wider discount in recent months.
Or is HCI’s discount — calculated on the basis of the market value of its unlisted assets and the group’s financials — actually much wider?
Ten years ago, HCI’s reticence about providing detailed value breakdowns was not really an issue, with the bulk of the portfolio value residing in listed counters in the gaming, leisure, logistics, media and industrial sectors. These days a serious chunk of value lies in unlisted Impact Oil & Gas, which is a meaningful minority participant in certain promising Namibian and South African offshore oil and gas discoveries.
The interim report details a R454m transaction in which HCI acquired another 3% in Impact, bumping its stake to a commanding 51.4%. That would infer a value of roughly R15bn for Impact, with HCI’s share worth about R7.7bn. That’s also just over half of HCI’s current market value.
Of course, it will be quite a few years before the oil wells start producing cash flows, and much can happen between now and then. Maybe that’s why the interim report notes that the carrying value of the Impact stake at the date of the transaction was just R2.9bn (which is not much more than the investment sunk into developing the Namibian and Eastern Cape oil concessions before TotalEnergies stepped in as senior partner).
I calculate the easier-to-discern “listed” rump of HCI at about R15bn — 50%-owned gaming group Tsogo and 41.5%-held hotel group Southern Sun account for the bulk of this with current valuations of R5.5bn and R4.5bn respectively.
You can’t entirely ignore the sprawling unlisted property portfolio, which generated not-insubstantial interim rentals of R206m and ebitda north of R180m. It’s quite an intriguing valuation proposition, though the listing of these oil and gas assets — which would help efforts to properly tie down the Impact value — is unlikely. Some punters might be hoping for such an option, but HCI showed little enthusiasm for it when engaging investors earlier this year.
The share price has shed about 10% since the release of the interim results. If the HCI share is on a bit of a slippery slope as the crude price hovers unconvincingly, then longer-term investors might stand a little closer. With part of the farm-out payback from TotalEnergies likely to be slated for a dividend and with ongoing distributions from its listed investments, HCI will soon be substantially degeared. This could give the executives some options in revisiting the structure, with unbundling exercises probably still the best way to unlock value.
Our story last week on ASP Isotopes, the Pretoria-based advanced materials start-up listed on the Nasdaq, could not have been worse timed. As the article was whisked off to the printers, an investment entity called Fuzzy Panda Research announced a short position in the company.
The note issued by Fuzzy Panda was anything but cute and cuddly — casting some nasty, bearish aspersions. Market response was brutal
The note issued by Fuzzy Panda was anything but cute and cuddly — casting some nasty, bearish aspersions. Market response was brutal, knocking ASP’s share price from more than $8 to, at one point, less than $5. The share has staged a mini recovery after the group responded that Fuzzy Panda’s report contained “speculative conjecture” and “claims that are inaccurate or filled with innuendo in an attempt to mislead investors about ASP Isotopes’s technology, leadership and future growth”. Subsequently ASP announced that it will host an “investor access event” in mid-January.
Quite frankly, ASP — technologically speaking — is well above my pay grade. So I’m not inclined to make a call at this delicate juncture. Hopefully local media and investors will crack the nod to the investor access event.
Many investors will remember Capitec Bank enduring a concerted tilt from a short seller some years back. The bank arguably came out of it stronger, with a clearer narrative around its systems, procedures and strategy. But it’s not always the case that short sellers can be sent packing. Let’s see how ASP copes with the slings and arrows in the months ahead.
Speaking of things that can trip you up, spare a thought for small agribusiness Crookes Brothers, which just can’t seem to get proper traction in its efforts to diversify away from its traditional sugar core. Shareholders would no doubt have taken heart at the group’s most recent financial report, which showed revenue from its promising banana division up 25% at R88m with operating profits up almost fourfold at R27m. Even though banana market prices were slightly lower, yields increased 20%.
But agribusinesses are prey to unpredictable and vicious vagaries. The banana segment was set for further gains over the next six months, with directors highlighting high carton prices and a large crop. Sadly, an ill wind blew in — a severe windstorm on October 27 that hit the Mpumalanga farm. This means a reduction of earnings from bananas over the next six months.
Hopefully the longer-term prognosis for bumper banana earnings remains intact. Directors did note that only a small percentage of the plant stem bases were destroyed. This means the impact on financial 2026 will mostly be a timing issue, with an estimated six-month delay in the cycle time for the affected stem bases to “sprout new suckers and bear fruit”.
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