The sizeable discount the market places on the sum-of-the-parts (SOTP) value of Hosken Consolidated Investments (HCI) was the big discussion point at the empowerment company’s annual general meeting on Tuesday.

HCI is anchored by its controlling stake in gaming and hotel group Tsogo Sun but also holds influential stakes in alternative gaming group Niveus, industrial conglomerate Deneb, broadcast group e-Media, as well as smaller interests in coal mining, oil and gas exploration and transport.

HCI was trading at about R130 at the time of the meeting, a substantial discount on the R159 per share net asset carrying value of its portfolio and an estimated R214/share SOTP.

Opportune Investment CEO Chris Logan said HCI’s shares offered a roughly R7bn discount on the underlying value of the investment portfolio — “a huge discount … surely there is a big opportunity to unlock value”.

HCI CEO Johnny Copelyn conceded the company’s shares had not performed in line with the underlying businesses. He emphasised that while there were opportunities to buy back shares at good values, such opportunities did not always present themselves as more than half of the issued shares were in the hands of shareholders that would not sell.

Copelyn said HCI would take serious note if an institutional shareholder wanted to sell out at current levels. “We’d be all ears, but getting a block of shares at the right price is an art,” he said.

Earlier in 2016 HCI executed a sizeable share buy-back exercise at R105 per share with executive directors, former directors and a key shareholder letting go of scrip.

RECM & Calibre CEO Piet Viljoen asked whether it made sense to buy out minorities in its JSE-listed subsidiaries (Deneb, Niveus and e-Media) as there was a lack of liquidity in the respective shares. Copelyn said each listing had its own logic and the market might not see the value if the operations were incorporated into HCI.

Logan asked whether HCI had contemplated publishing a regular guide to the SOTP value. Stellenbosch-based investment company PSG updates its SOTP value daily.

Copelyn said 90% of HCI’s value resided in listed companies, which should provide sufficient guidance for investors to formulate a valuation.

Source: Business Day – Mark Hasenfuss