Buy: JSE Limited
While delistings are still outpacing listings at the JSE, there does seem to be some life in the IPO market. We are seeing smaller counters depart and being replaced by large counters such as Optasia, and a few other major listings have been muted in the media. Combine this with a market and sentiment uptick in JSE-listed stocks over the past 12 months, and the short-term tailwinds look good for the business. South Africa’s move off the greylist also won’t hurt local or international sentiment, and emerging markets are coming back into vogue for global asset allocators wary of sky-high valuations in US equities. The JSE itself also looks cheap relative to other listed stock exchange operators globally, which, lest we forget, have also borne the losses of companies from their own listed environments over the past 20 years. Could we even see a bid for the JSE — currently still subject to ownership limits — from private equity or another exchange operator?
Sell: Remgro
Remgro recently paid out a 200c a share special dividend alongside its final dividend to help ease the financial pain of its long-suffering shareholders. Indeed, using the nifty shareholder return calculator on the Remgro website, as of the time of writing, Remgro has delivered a total shareholder return of 6.62% inclusive of dividends for the past decade, or 0.64% annualised. These returns are nominal. Factor in inflation, and the real return for Remgro shareholders over the past decade has been negative. Changes to Remgro’s underlying portfolio of assets have done little to unlock value for shareholders, and the prospects for significant value being realised seem limited given the current strategy. As other investment holding companies have exited the JSE or are in the process of doing so at discounts to their stated NAV, the discounts on offer for the remaining investment holding company counters, such as Remgro, look decidedly less attractive given that investors can no longer assume delisting offers close to last stated NAVs.
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