Business Maverick


The Finance Ghost: The market lowdown on Oceana, Remgro and Sabvest

The Finance Ghost: The market lowdown on Oceana, Remgro and Sabvest
Oceana logo. (Photo: Unsplash / Krisztian Tabori) | Sabvest Capital Limited. (Photo: Supplied) | Remgro Limited logo. (Photo: Supplied)

The seas are mysterious, volatile and tough places to make a living. Oceana lives this daily with its fishing businesses in South Africa and the US.

The Oceana group has to deal with everything from stormy weather to changes in the world’s most complicated ecosystem. On top of that, the dynamics of supply and demand lead to wild swings in the pricing of seafood products. If you enjoy a low-stress life, look away now.

Over the past two years, Lucky Star was an aptly named business in the group as Oceana shareholders were thanking it regularly. There had to be a slowdown at some point, and Lucky Star’s revenue was down 8.7% for the five months to 25 February.

The company attributes this to a particularly strong base period in which customers bought ahead of pricing increases. The rest of the South African business also struggled with lower sales and production volumes in fishmeal and fish oil, along with hake catch rates below historical averages.

It was the business in the US that carried the team in this period with revenue in the fishmeal and fish oil business more than doubling. Thanks to this performance, Oceana expects group Heps to be at least 60% higher year on year for the six months ending March 2024.

Remgro didn’t grow

Remgro isn’t endearing itself to investors as the share price has been in a downward spiral this year. The drop is more than 21% and counting, giving away all the gains — and a bit more — of the past 12 months.

The first wobble was the announcement of Mediclinic’s performance, although it’s truly beyond me why anyone is surprised to see a lacklustre performance from a hospital group. Generally speaking, they are a poor allocation of capital because the returns just don’t justify the level of investment.

This didn’t stop Remgro from helping to take the group private, incurring some pretty serious transaction fees along the way. It’s a pity that adjusted earnings were flat for the interim period at Mediclinic despite a 5% increase in group revenue.

Still, that looks fantastic compared with what has happened at Heineken Beverages in the aftermath of the Distell deal.

These numbers need you to show your identity document and not because of the alcohol, but rather because of the PG18 rating attached to a swing from a positive contribution of R517-million in headline earnings to a loss of R208-million, with Capevin contributing R57-million of that. It sure didn’t take long for a large impairment to be recognised on this investment.

Remgro has an unfortunate reputation for underperformance and this does absolutely nothing to improve that situation.

Sabvest had a tough year, too

When it comes to investment holding companies, Sabvest is somewhat revered on the JSE. With a 15-year compound annual growth rate in the net asset value per share of 17.2% excluding dividend reinvestment and 18.5% including it, it’s not difficult to see why.

Even this track record wasn’t a strong enough foundation for 2023, though.

For the first time in two decades, the net asset value fell over a one-year period. Sabvest was badly burnt by Transaction Capital (like so many of us) and also struggled with the general South African macroeconomic pressures in the private company portfolio.

It’s not always about the domestic troubles, though — portfolio company Intelligent Labelling Solutions bore the brunt of disappointing retail demand in the Northern Hemisphere.

The net asset value per share fell by 0.7% for the year, so that’s a whole lot better than Remgro, whose net asset value fell by 4.6% in just six months.

Nevertheless, it’s still an ugly outcome that does no favours for that beautiful long-term track record, so Sabvest will hope to resume growth in the net asset value in 2024. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.


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