My musings on the proposed delisting of empowerment investment company African Rainbow Capital Investments (ARC) hit a nerve with quite a few readers. The level of cynicism around the proposed scheme surprised even me … So contributor Mark Tobin’s thought-provoking tilt at developments in this week’s Investing section is well timed.
What did give me a huge lift last week was some intricate detail in investment company Sabvest Capital’s annual report. Specifically, its investment in unlisted empowerment investment entity Masimong Group Holdings, headed by the enigmatic Mike Teke.
Masimong and Teke have not taken the spotlight, but it’s clear some good things are quietly afoot. Sabvest has a 9% economic interest in Masimong, which has extensive interests in farming (citrus, tea, table grapes, dates and various agri-inputs through WinField United South Africa), as well as investments in liquor groups KWV and Halewood International, electrical supplies group ARB Holdings, financial services specialist Anchor and Chemfin.
Sabvest values its holding in Masimong at R528m. That infers a value of about R5.9bn for Masimong — larger than Sabvest’s current market value of R3.6bn and far bigger than the JSE’s oldest empowerment company, Brimstone (which has a R1.12bn market value). Sure, Masimong is nowhere near as big as BEE stalwarts Hosken Consolidated Investments (HCI), at R12bn, and ARC, at nearly R14bn — but it’s a substantial venture that has exposure to some interesting unlisted companies.
I certainly hope the mighty Masimong will wend its way to the JSE in the not-too-distant future. But I can’t help thinking about a transaction in which Masimong might merge with — dare I say, “reverse” into — Sabvest to create a black-controlled investment company of considerable scale and diversity. It seems clear that Sabvest and Masimong already have a workable arrangement for co-investment … So some legwork has already been done.
Apropos Brimstone, that long-standing empowerment quandary. I sat through the group’s recent investor presentation, where not a single question was posed by shareholders or investors who listened to the webcast. Brimstone, for all intents and purposes, is a proxy for two large listed fishing counters — Oceana and Sea Harvest.
Co-founders Fred Robertson and Mustaq Brey are genuine “good okes” with a reputation for being reliable and supportive empowerment partners. They’ve also known when to cut their losses. Brimstone saw the writing on the wall at Taste Holdings and exited before that ball of pizza dough got burnt to a crisp.
Readers with longer memories will also remember Brimstone being a strategic equity partner at Nando’s during its brief tenure as a listed counter. If only the group had insisted on hanging in at an unlisted Nando’s …
Other than the current food focus, there are some bits and bobs — plus a heap of debt that dangles like the sword of Damocles over any value-unlock proceedings. Brimstone states an intrinsic NAV of R10.79 a share on a fully diluted basis. The share price sits at less than half that value, a dire pronouncement by the market on the chances of a value unlock in the short term.
The issue at Brimstone is the remaining debt, which — albeit meticulously reduced by the sale of various smaller investments — will still incur substantial interest charges. Whether the dividend flows from the mainstay investments in Oceana and (especially) Sea Harvest will comfortably cover this is not a given … at all. The options for further sales from the portfolio look fairly limited, with the only investment of serious scale being the stake in unlisted property group FPG.
All things considered, there should be some haste in selling off one of the fishing investments to cull the remaining debt and executing on the value unlock
Frankly, it’s quite surprising that Brimstone is paying dividends and buying back shares under these circumstances. All things considered, there should be some haste in selling off one of the fishing investments to cull the remaining debt and executing on the value unlock.
I understand that a sale of all or part of Sea Harvest or Oceana cannot be contemplated until the fishing rights process — with appeals still outstanding — is finalised. Once that’s done, I would think an even bigger challenge is finding a buyer for a big chunk of either fishing business. I can’t see buyers falling over themselves to acquire either asset … not even the broad-based Masimong. Brimstone will be hoping that, in the event of a sale of Sea Harvest or Oceana, it does not coincide with AVI dangling its hake fishing business, I&J (see Adele Shevel’s story in this week’s Investing section).
Staying with the theme, one of the JSE’s smallest empowerment counters, Rex Trueform, continues its evolution. The group, under the guidance of former HCI stalwart Marcel Golding and asset manager Hugh Roberts, has slowly diversified away from its fashion retailing focus.
The most interesting diversion is into specialist media (remembering Golding was a prime mover at broadcast group eMedia), and the expansion of the Telemedia offering. Telemedia has bought 35% in AI Sport Africa, which offers automated sports coverage. This service can be harnessed for club sports, school sports or other significant sporting occasions — making high-quality coverage affordable. The competitive nature of sports people at all levels in South Africa, coupled with the prevalence of social media platforms (where games can be streamed and highlights posted), suggests this could be a winner.
I would have loved my club champs doubles match on Friday to have been immortalised in high definition — if only to regularly remind my partner of just how much running and rallying I did before he nonchalantly putzed the “gimme” volley on set point into the back wall. There … that’s off my chest then (he says without a hint of bitterness).
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