Plague diary — week eight: Education has always been a bad business for me. I remember that before I received my academic and first-team dark blue tie at school, I donned the basic dark blue-light blue striped version. While the striped tie carried no outward honour, the reverse side of the tie was where the real mark of school achievements was measured.
We would boldly mark a stroke in the light blue section of the tie each time we got "cuts" — which were dished out liberally at boys’ schools in the Eastern Cape back in the bad old days.
In standard eight (a particularly bad year for adolescent Hasenfuss) my tie, by the end of the third term, had no more space left for denoting bouts of corporal punishment.
I failed every hair inspection, puttered into school late on my baffle-less Honda Tornado, skipped homework and (horror of horrors) often neglected to watch the rugby first team matches.
While I never looted the tuckshop, I did get flogged most savagely for being in possession of a school hymnal where a friend’s older brother had scratched in a Star Wars theme (Onward Galactic Stormtroopers, and so forth).
I think I took a worse beating this week in private education stock AdvTech. I have always wanted to own AdvTech. I think it’s a great business, with brilliant academic brands and solid management.
But it behaved like a junior exploration stock over the past week, flying all over the place as — I assume — the market took cognisance of the lack of clarity from the education department about the reopening of schools.
Initially I was spooked out. But I reckon at this price — presuming schools resume some form of normal functioning by the third term — an investor is pretty much getting AdvTech’s vibrant tertiary business for next to nothing.
Admittedly if there is more uncertainty about education there will be even more pain for AdvTech. But I’m going to take the pain … if I must.
What might well be worse than market pain is investor frustration. In this regard I am glad I took the recent dividend from Trencor and ran. Trencor was one of the JSE’s great "grey chips", and I even remember the late, great Mervyn Harris — a man whose daily market reports were prescribed reading in the days before the internet — telling me back in 1988 that it was the one share "you can buy blind".
Trencor, over the long term, has been a superb investment vehicle — ranking as one of the pioneering rand hedge stocks. It’s sad that this legacy risks being besmirched by a horrible impasse involving the remaining cash pile of about R1.7bn.
Earlier this month Trencor confirmed that its remaining 5.3% shareholding in container management group Textainer would be distributed to shareholders via a dividend in specie. The problem now lies in distributing the substantial dollar cash pile, which is subject to complicated indemnity arrangements, to shareholders.
Pessimists will pencil in a long wait, especially since the JSE has granted the cash shell an extended life until the end of 2024. Trencor now becomes a fascinating value play for those willing to gamble on the intricacies of the indemnities being unravelled sooner rather than later — and on the movement in the rand-dollar exchange rate. At 770c Trencor’s share price is dismissively discounting the cash holding. It would be tempting to consider a punt. Shareholders, of course, are not as lucky as the remaining Trencor directors. These executives will get a nifty R21m a year for managing the complexities of a cash shell. Not exactly an incentive to wind up matters quickly, is it?
What I did take considerable heart from last week was Richemont, after culling its dividend, advising that shareholders might be afforded a chance to buy shares at a preferential price.
That’s smart engagement in these difficult times.
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