06 April 2023
|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%|
|Brent Crude ($’barrel)||85,95||79.73||84.91||-1.21%|
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.
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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.