Remgro sell Unilever South Africa stake for R11.9bn

Remgro, a leading South African investment company, has announced that its subsidiary is selling its 26% stake in Unilever South Africa Holdings to Unilever for a deal worth R11.9bn (US$894mn) that will include both cash and the complete ownership of Unilever’s South African spreads business.


Four South African stocks you should invest in this year

Alwyn van der Merwe, director of investments at Sanlam Private Investments, looks at a four stocks he expects will offer the best value to investors in 2017.

The analyst noted that the four stocks he picked at the end of last year all outperformed the market comfortably.

Barloworld was the best performer with a total return over the year of 41.7%, followed by Sappi at 27%. Nedbank was up by 15%, and KAP by 8.5%.

“Over the years we’ve learnt that the one-year investment outcome of a limited list of shares can be very random, and I therefore pick shares using a combination of both valuation criteria and so-called momentum criteria – price momentum and earnings revision,” van der Merwe said.

This methodology differs somewhat from the company’s normal stock-picking criteria where it selects shares for the long term.

“Our share selection methodology therefore seems to be bearing fruit,” van der Merwe said.

Here are the analyst’s four picks for 2017:


The Stellenbosch-based investment group gives investors exposure to listed assets such as Mediclinic and the First Rand Group, but also to a number of quality unlisted shares, which currently comprise around 22% of the net asset value (NAV) of the group.

Historically, Remgro shares have tended to trade at an average discount to their NAV of 15%, and the current 18.25% discount to NAV is attractive compared to its own history.

Looking at the performance of the underlying shares, the Mediclinic share price had a torrid time over the past year as a result of one-off events, such as the Al Noor Hospitals Group transaction amounting to R788 million.

Buying Remgro shares today will therefore provide investors with exposure to Mediclinic at a markedly reduced price, a quality unlisted portfolio, and a premium bank First Rand – at an attractive discount, van der Merwe said.

Metair Investments

The analyst noted that this share was down-rated significantly over the past two or three years, mainly as a result of a one-off retooling of Metair’s South African manufacturing facility and struggling European operations largely on the back of deteriorating political relations between Turkey and Russia.

With these issues now in the past, ‘normal’ business conditions will restore Metair’s margins. As a result the share should re-rate on the back of better expected performance that the market hasn’t yet discounted, van der Merwe said.

“Based on our research, we’ve estimated earnings per share of R1.50 for the 2016 financial year. For 2017, we forecast earnings per share of R2.44, which translates to growth of 62%. This puts the share on an 8 times forward earnings multiple, which is very cheap. If Metair’s operational results do turn around as expected, this share will certainly reward investors.”

Hudaco Industries

The analyst pointed out that this business has been under pressure for a number of years, resulting from the slump in industrial production and in the mining industry since 2008.

“Despite tough business conditions, Hudaco has remained a well-managed company,” van der Merwe said. “The group has diversified its product range, making it less reliant on specific industries. Should we experience even a minimal recovery in the mining sector and industrial activity in South Africa, this share’s performance is likely to beat market expectations.”

Hudaco is now trading at a forward earnings multiple of 8.7 times, which is a steep discount to the rest of the market. It is an unloved share in terms of its rating, which normally creates great opportunities for patient investors, van der Merwe said.

Barclays Africa Group (formerly ABSA Group)

Like other banks, Barclays/ABSA was under severe pressure until mid-2016 as a result of tough economic conditions.

“The market was also generally disappointed with management as the bank has lost prominent senior managers in recent years. The UK influence in the top structures was also concerning,” van der Merwe said. The reduction of the Barclays shareholding in ABSA, and the resultant increase in local leadership, should lead to a narrowing of the discount at which the company is currently trading relative to other banks, the analyst added.

“I believe Barclays/ABSA has managed the group’s bad debts reasonably well, for which it hasn’t received much credit. The share is trading at a forward earnings multiple of 8.3 times, which is a massive discount to the rest of the market. If the South African economy remains on its current modest recovery path, then this share is simply too cheap and should re-rate,” he said.





Business Tech 


Container brothers pack it in

Two of Cape Town’s most successful industrialists, brothers Neil and Cecil Jowell, have retired after more than six decades of involvement at the ever-morphing transport business Trencor. Neil and Cecil are the sons of the late Joe Jowell, who founded Trencor – then trading as Jowells Garage and Transport – as a humble motor dealership and one truck transport business in Springbok in the late twenties.


The Cape’s financial landscape

Cape Town is often viewed as the hub of money management – an image obviously enhanced by the fact that two of the country’s most iconic savings institutions, Sanlam and Old Mutual, have deep roots in the city. Then there’s also the fact that Stellenbosch-based investment giants like Remgro (which nurtured international tobacco and luxury goods brands) and PSG (which birthed the now highly successful Capitec Bank) have also pulled off inspired financial engineering over the decades.


Remgro revs it up

AFTER investing well over R5bn in its most established key assets, Stellenbosch-based conglomerate Remgro could be looking further afield for new investments.

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