CAPE TOWN — Hosken Consolidated Investments (HCI), the R17.6bn investment company, continues to draw strength from its casino and media interests. But several smaller investments — most notably coal and property — are starting to show promise.

Interim results to end September released on Thursday showed that HCI’s holding in casino and hotel group Tsogo Sun generated R349m or 60% of the group’s headline earnings. HCI’s media interests — held via Sabido Investments and including e.tv — accounted for another 30% of headline earnings with a R174m contribution.

Overall headline earnings were up 8.5% to R577m, which suggests full year to end March headline earnings could move close to R1.2bn.

Interim headline earnings per share increased by 13% to 470c per share after HCI bought back more than 22-million shares at an average price of about R108 per share.

Although headline earnings are not usually the best performance gauge for investment companies (which are traditionally measured by growth in net asset value), they are probably the best fundamental guide for investors.

For years, HCI has doggedly refrained from providing a meaningful guide to the intrinsic value of the investment portfolio.

The interim results again merely reflect a net asset carrying value of R104 per share — which, judging by a ruling share price of R146.50, is not a reliable pointer to the true value of HCI’s underlying investments.
HCI declared a 30c per share interim dividend, covered almost 16 times by earnings.

The conservative cover relates to HCI’s remaining debt load of R1.65bn at head office level and R1.34bn in operating subsidiaries.

Cash flow was also substantially lower this interim period with HCI having to cover a R41m increase in expenditure on e.TV’s programme rights, increased outflows of R116m relating to the receivables of Golden Arrow Bus Service (due to delayed payment by the Department of Transport) and a R93m reduction in the trade payables of liquor group KWV Holdings.

While the cash spinning casino and media interests look likely to dominate HCI’s earnings profile for the foreseeable future, there were some encouraging advances by smaller investment interests.

HCI’s coal operations saw a 68% jump in headline earnings to R37m, and a second mine is expected to come into production shortly.

The company’s fledgling property interests grew its contribution from R7m to R11m.

There has been persistent speculation that HCI could look to separately list its property interests, although CEO Johnny Copelyn reiterated that the portfolio was still at an early stage of development.

Mr Copelyn said the Kalahari Village Mall in Upington was now open, while The Point shopping centre and offices in Sea Point would open its retail component before Christmas and the offices early in the next financial year.

He said several other development properties had been acquired, including land in Modderfontein and Midrand, and the Lynnridge Mall in Lynnwood Ridge.

Mr Copelyn said HCI was pleased with the performance of its investment portfolio in the interim period despite some inconsistencies in more peripheral areas.

Source: BDLive – Marc Hasenfuss