Our opinion on the current state of REM

Remgro, led by Johann Rupert, operates as an influential investment holding company with a diverse portfolio spanning various sectors. It holds a significant 28.2% stake in Rand Merchant Bank Holdings (RMH) and a 3.9% stake in Firstrand. Beyond its financial sector investments, Remgro's interests extend to healthcare through Mediclinic, now delisted from the JSE, highlighting its strategic focus on international healthcare markets including Switzerland, Southern Africa, and the United Arab Emirates.

The company's strategic divestment from the London-listed Unilever Group, which resulted in a R4.9 billion cash infusion plus ownership of the Unilever spreads business in Southern Africa, underscores Remgro's adept maneuvering within the global business landscape. This move expanded its presence in the foods division, adding brands like Flora and Rama to its portfolio and potentially integrating these assets into a new subsidiary under RCL Foods, named "Silver 2017."

In the insurance sector, Remgro maintains a 29.9% stake in RMI, alongside other notable investments such as a 23.1% stake in Grindrod and a 30% stake in Seacom. The acquisition of Vumatel by Remgro subsidiary Community Investment Ventures Holdings (CIVH), emphasizing Vumatel's commitment to providing free uncapped fibre services to schools, illustrates Remgro's dedication to social responsibility and infrastructure development.

Remgro's interest in expanding its portfolio into the electricity generation sector to ensure reliable energy supply for its businesses, coupled with its significant transactions involving Heineken's acquisition of Distell and the formation of "Infraco" with Vodacom, reflects its strategic vision and proactive approach to leveraging corporate actions for growth.

The company's bold move to acquire the remaining 55% of Mediclinic, leading to its delisting from the JSE, represents a significant valuation and investment in the healthcare sector. For the fiscal year ending 30th June 2023, Remgro reported a revenue increase to R48.1 billion and an 8.9% rise in HEPS, alongside a notable 16.6% increase in intrinsic net asset value (INAV) to 24847c per share. These financial achievements highlight the positive impact of its strategic decisions, including corporate actions related to OUTsurance, Grindship, Grindrod, and Mediclinic, on its overall performance.

However, a trading statement for the six months ending 31st December 2023 projects a significant decline in HEPS by 35% to 45%, attributed to the effects of recent corporate actions, many of which are non-recurring items. This anticipated decrease reflects the dynamic nature of Remgro's investment strategy and the impact of its corporate restructuring and transactions.

Despite the forecasted decline in earnings, Remgro's share has been on an upward trajectory since September 2020, currently trading at a P:E of 11.86. This valuation suggests that Remgro remains an attractive investment, offering good value at current levels, particularly for investors seeking exposure to a diversified portfolio with a strong focus on strategic growth and restructuring initiatives within South Africa and beyond.