Our opinion on the current state of REM

Johann Rupert's Remgro (REM) operates as an investment holding company, boasting a diverse portfolio of investments. Notably, it holds a 28.2% stake in Rand Merchant Bank Holdings (RMH) and a 3.9% interest in FirstRand. Additionally, Remgro owns Mediclinic, an international healthcare company with divisions in Switzerland, Southern Africa, and the United Arab Emirates, which has been delisted from the JSE. Recently, Remgro sold its 25.8% stake in the London-listed Unilever Group, acquiring the Unilever spreads business in Southern Africa, which includes renowned brands like Flora and Rama.

In the foods division, Remgro owns significant stakes in Distell (31.8%) and RCL Foods (77.2%). The Unilever spreads division may find a home within a new subsidiary called "Silver 2017." Remgro also holds interests in the insurance sector, with a 29.9% stake in RMI, among other investments, including a 23.1% stake in Grindrod and a 30% stake in Seacom. The acquisition of Vumatel by Community Investment Ventures Holdings (CIVH), a Remgro subsidiary, has been approved by the Competition Tribunal, with conditions requiring free uncapped fibre services to nearby schools for the next decade.

Remgro announced plans to increase its stake in RCL Foods and venture into electricity generation to supply its businesses due to concerns about Eskom's reliability. Moreover, a significant development occurred with Heineken's offer to buy 100% of Distell for R41.1 billion, a transaction from which Remgro stands to benefit substantially given its 31.7% ownership. Additionally, a partnership with Vodacom resulted in the creation of "Infraco," wherein Remgro retains a majority stake focused on dominating South Africa's fibre provision.

Furthermore, Remgro recently completed the acquisition of the remaining 55% stake in Mediclinic, delisting the company from the JSE. However, its latest financial results for the six months ending 31st December 2023 showed a 39.1% decrease in headline earnings per share (HEPS) and a 4.6% decline in intrinsic net asset value (INAV). Remgro attributed the discrepancy between HEPS and headline earnings to the accretive impact of shares repurchased during the financial year.

Technically, Remgro's share price experienced a low at 8388c on 7th September 2020 and was on an upward trend. However, recent disappointing results caused the share to break out of this trend. Currently trading at 12471c with a P/E ratio of 12.36, once the negative news is fully discounted, the share may represent good value. We recommend applying a 65-day exponential moving average and waiting for a clear upside break before further investigation.