SA’s Heavy-Weight Champion – Weekly Stocktake with Danyaal

SA’s Heavy-Weight Champion – Weekly Stocktake with Danyaal

06 April 2023

Key Indicators

Index / Fund / Rate Start of Year Last week This Week % change YTD
JSE ALSI 73 049 76 100 77 114 5.56%
NASDAQ Composite 10 467 12 221 12 067 15.29%
S&P 500 3 840 4 109 4 105 6.90%
Prime Lending Rate 10,50% 11.25% 11.25% 7.14%
Lunar BCI WW Flexible Fund 141,43 155.09 159.18 12.55%
USD/ZAR 16,98 17.79 18.23 7.36%
EUR/ZAR 18,44 19.27 19.92 8.03%
Brent Crude ($’barrel) 85,95 79.73 84.91 -1.21%

Source: Iress

Weekly Stocktake with Danyaal

SA’s Heavy-Weight Champion

This week, is about SA’s heavyweight, Remgro, an investment company listed on the Johannesburg Stock Exchange (JSE). As Remgro has multiple businesses under its umbrella, investors need to assess it from a different perspective. They need to consider the company as a whole, and compare it to the weighted-average market price of the individual stocks. This is known as the Net Asset Value (NAV) valuation method.

Let’s examine Remgro’s portfolio, as of their recent 31 Dec 2022 results. Mediclinic, Outsurance, and CIVH (Community Investment Venture Holdings) accounted for 47.5% of their portfolio, with other notable businesses including FirstRand and Discovery. Remgro’s total NAV was R125.9 billion, with an NAV per share of R223.86. However, the share price on that day was only R133.03, representing a discount of 40.6% compared to the NAV per a share.

It’s not uncommon for investment companies to trade at discounts to their NAV, and this can happen for several reasons. For instance, investors may not believe that the businesses in their portfolio are valued accurately at current market levels; corporate costs, including the salaries or fees of the investment managers may also be high. Additionally, the price of shares is influenced by supply and demand. If there’s greater demand for individual stocks than for the investment company’s stock, a discrepancy is created.

At Lunar Capital, we hold Remgro in our BCI Worldwide Flexible Fund. Remgro invests in businesses for the long term, which aligns with our investment approach. Furthermore, we find their underlying portfolio quite attractive, with the relatively high discount to NAV.

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Lunar Capital on Eastwave Radio

Every Tuesday, at 07h45, Sabir chats with Nazia from Eastwave Radio (92.2 fm, live stream on www.eastwave.co.za) on investing and the markets.

Listen to last week’s radio session here: https://youtu.be/N1mCJ8hyCNk

Click here to access your account to view statements, obtain tax certificates, add, or make changes to your investments.

Our email address is: [email protected]

Disclosures
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This roundup is prepared for the clients of Lunar Capital (Pty) Ltd. This roundup does not constitute financial advice and is generated for information purposes only.
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Lunar Capital
on Eastwave Radio

Every Wednesday, at 07h45, Sabir chats with Nazia from Eastwave Radio (92.2 fm, live stream on
www.eastwave.co.za) on investing and the markets.

eastwave-radio
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