Category Archives: Astoria Investments (ARA)

Research reports on Astoria Investments Ltd (code: ARA), an investment holding company.

Astoria Investments – Results Note – Leatt Investment Concluded

Share Code: ARA – Market Cap: R508m – Discount to NAV: 40%

Q1:24 Results: Currency headwinds

  • Astoria Investments reported its Q1:24 results that show Net Asset Value (NAV) per share decreased -7.7% and -4.8% in USD and ZAR respectively as currency headwinds impacted translations and Goldrush (code: RACP) and Leatt’s (code: LEAT) share price pressure endured for this period.
  • As a reminder, Astoria’s reporting policy for Q1 and Q3 periods is not to perform detailed valuations of unlisted investments (except when developments require an immediate and material change in value). Price changes for listed investments and currencies are reflected on an ongoing basis.
  • In our updated Sum-of-the-Parts (SOTP) valuation below and on the next page, we have done the same and updated our view for the latest share prices and exchange rates.

Commentary: Further Leatt Investments Concluded

  • Astoria’s further acquisition of Leatt Corp’s shares was concluded during this period. We discuss this investment and the underlying business in some detail in our previous results note (LINK) and consider it an attractively priced asset with the deal using Astoria’s equity in a non-dilutive manner.
  • Late in April, Astoria’s management hosted an investor event that was recorded and can be viewed here: LINK.

Valuation, 12m TP & Implied Return: Above Average Discount

  • Updating Astoria’s NAV to current prices, the share is trading at c.40% discount to the current NAV (Previously: 42%).
  • If we take out our calculated “HoldCo discount” of c.14.2% (Previously: 13.9%) from this NAV, we arrive at a fair value for Astoria’s shares of c,1162cps (Previously: 1192cps) or c.42% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1386cps (Previously: 1420cps) that implies a potential return of c.69% from the current share price.

Astoria Investments – Results Note – Discount Appears too Wide

Share Code: ARA – Market Cap: R498m – Discount to NAV: 42%

FY 23 Results: A Mixed Bag of Results

  • Astoria’s USD Net Asset Value (NAV) felt pressure and slipped marginally to $0.7947 per share (FY 22: $0.8266 per share), though the Rand NAV was slightly up at 1454cps (FY 22: 1406cps) as the Rand weakened over the period.
  • A decline in diamond prices was a headwind on diamond interests, loadshedding hurt Goldrush’s LPM performance & Leatt’s share price followed its sales down over an extra-ordinary trading period.
  • On the other hand, Outdoor Investment Holdings (OIH) traded (really) strongly (see relative sales performance below), ISA Carstens saw +10% enrolment growth & Vehicle Care Group (VCG) is proving its model nicely.

Commentary: Conservative NAV & Upside Optionality

  • Other than valuing A-Tec in OIH separately as a Norwegian asset and lifting ISA Carsten’s Academy multiple from 6.0x to 7.0x (but it remains well below other listed educational stock multiples), Astoria’s unlisted valuations remain largely consistent with history and, arguably, conservative.
  • A FY 24E normalisation in diamond prices & in Leatt Corp’s trading environment could point to upside in Astoria’s NAV (Leatt & diamond interests are a third of the Group’s NAV).

Valuation, 12m TP & Implied Return: Above Average Discount

  • Updating Astoria’s NAV to current prices, the share is trading at an above-sector-average c.42% discount to current NAV (Previously: 34%) despite its strong growth in NAV (+32.4% y/y CAGR in Rand-NAV since management took over on 1 December 2020)
  • If we take out our calculated “HoldCo discount” of c.13.9% (Previously: 15.0%) from this NAV, we arrive at a fair value for Astoria’s shares of c,1192cps (Previously: 1152cps) or c.49% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1420cps (Previously: 1365cps) which implies a potential return of c.77% from the current share price.

Astoria Investments – Results Note – Wider Discount & (Still) Under Cautionary

Share Code: ARA – Market Cap: R504m – Discount to NAV: 34%

Q3:23 Results: Softer Quarter

  • In Q3:23, Astoria reported a flat ZAR-NAV of 1408cps (FY 22: 1406cps), though a weaker ZAR (11% weaker against the USD from FY 22 close to Q3:23 reporting date) pushed the USD-valuation slightly lower to $0.74 per share (FY 22: $0.83ps).
  • Astoria typically only fairly values its unlisted investments with its Q2 (i.e. H1) & Q4 (i.e. Full-year) results &, thus, this result involves only updated share prices & exchange rates.

Commentary: Loadshedding Impacted Goldrush

  • RECM & Calibre Preferences Shares’ (code: RACP) lower share price shaved c.39cps from Astoria’s SOTPs, & this appears driven by pressure at Goldrush from loadshedding (i.e. lost trading hours, higher costs from generators & consumer pressure). It is encouraging to see that Goldrush’s average revenue per (active) machine grew +5% y/y & that the Sports Betting & Online Gaming divisions grew strongly (+18% & +51% respectively). Cash flow was strong at Goldrush & we expect its operations to stabilize as it solves for power & optimises for the environment, thus we remain optimistic on RACP’s prospects.
  • As noted above, the other significant drag on Astoria’s USD-NAV has been the 11% weaker ZAR/USD exchange rate.

Valuation, 12m TP & Implied Return: (Still) Under Cautionary…

  • Updating Astoria’s NAV to current prices, the share price is trading at a c.34% discount to current NAV (Previously: 24%).
  • If we take out our calculated “HoldCo discount” of c.15.0% (Previously: 14.5%) from this NAV, we arrive at a fair value for Astoria’s shares of c.1152cps (Previously: 1213cps) or c.22% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1365cps (Previously: 1440cps) that implies a potential return of c.52% from the current share price.

Note: The share is (still) trading under a cautionary announcement due to a potential acquisition.

Astoria Investments – Results Note – Durable Performance & Cautionary Issued

Share Code: ARA – Market Cap: R604m – Discount to NAV: 24%

Q2:23 Results: Currency and Market Headwinds

  • Astoria reported Net Asset Value of $0.748ps (FY 22: $0.827ps) or R14.08ps (FY 22: R14.06ps) with growth in Outdoor Investment Holdings (OIH) offset by lower RACP (i.e. Goldrush) & Leatt Corp share prices. A weaker Rand offset this in the Rand-based NAV but detracted against the USD-based NAV.
  • Unlisted valuations remain conservative with multiples unchanged.

Commentary: Businesses Robust & Investments Degearing

  • Importantly—given its 48% of NAV—OIH is trading well, growing both footprint and store-level trading density.
  • Broadly, underlying businesses are performing &, even those facing headwinds, are trading resiliently and offer upside the moment the broader economy/ies improve.
  • Along with existing businesses growing their profits, other potential future fair value moves include both the Family Pet Centre (FPC) and Vehicle Care Group’s (VCG) refined business models showing success. Likewise, Trans Hex Marine’s historic cost should be fairly valued in future results.
  • During H1:23, Astoria paid back some of its investment-level debt (we expect this to continue). This adds to NAV & lowers financial risk while freeing capacity to regear for another acquisition (see the cautionary noted below).

Valuation, 12m TP & Implied Return: Under Cautionary…

  • Updating Astoria’s NAV to current prices, the share price is trading at a c.24% discount to current NAV (Previously: 34%).
  • If we take out our calculated “HoldCo discount” of c.14.5% (Previously: 14.0%) from this NAV, we arrive at a fair value for Astoria’s shares of c.1213cps (Previously: 1192cps) or c.11% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1440cps (Previously: 1422cps) that implies a potential return of c.33% from the current share price.

Note: The share is currently trading under a cautionary announcement due to a potential acquisition.

Astoria Investments – Results Note – Quarterly Result & Valuation Update

Share Code: ARA – Market Cap: R515m – Discount to NAV: 34%

Q1:23 Results: High Base Effect in Play

  • For the quarter ended March 2023, Astoria reported USD NAV of 75.60cps & ZAR NAV of 1340.75cps.
  • Compared to Q4:22, this is a -8.5% & -4.6% respective decline but against Q1:22 the year-on-year growth is still +6.4% & +29% respectively.

Quarterly Updates, Results Notes & Forex Volatility:

  • Astoria reports quarterly but its valuation policy is only to perform detailed valuations of its unlisted investments at major Q2 (i.e. H2) and Q4 (i.e. FY) period ends. For Q1 and Q3 results, unlisted valuations are kept unchanged, except in instances where developments require an immediate and material change in value (i.e. ‘no news is good news’ if unlisted valuations remain unchanged). Price changes for listed investments and currencies are reflected on an ongoing basis.
  • Due to this, we will publish one-page Q1 & Q3 results notes with fuller results notes for Q2/H2 and Q4/FY period ends.
  • As per our Initiation of Coverage, we have updated valuations in their respective economic currencies (e.g. OIH in Rands, Trans Hex in USD, etc) and converted either back to Rands or back to USD’s for respective NAVs. Given the weakening in the Rand against the US Dollar, this approach is creating some short-term volatility in our USD-based NAV while our ZAR-based NAV is more “stable”. This should smooth out over time.

Valuation, 12m TP & Implied Return: Discounted Share Price

  • Updating Astoria’s NAV to current prices, the share price is trading at a c.34% discount to current NAV (Previously: 36%).
  • If we take out our calculated “HoldCo discount” of c.14.0% (Previously: 14.6%; narrowed due to the spike in the domestic risk-free rate) from this NAV, we arrive at a fair value for Astoria’s shares of c.1192cps (Previously: 1170cps) or c.23% higher than the current share price (Previously: 25%).
  • Rolling this fair value forward at our Cost of Equity, we arrive at a 12m TP of c.1422cps (Previously: 1381cps) which implies a potential return of c.55% from the current share price.

Astoria Investments – Initiation of Coverage – Unique & Growing Businesses, Discounted

Share Code: ARA – Market Cap: R492m – Discount to NAV: 36%

Astoria: Structure, Aim & Portfolio

  • A tax-advantaged, Mauritian “HoldCo” that is listed on both the JSE and the SEM, Astoria Investments’ aim is to grow its hard currency (i.e. USD) NAV per share at a high real rate over time.
  • Having permanent capital & an aligned investment manager (see below), Astoria has invested in a range of unique, unlisted, growing businesses with strong, aligned management teams.
  • The largest of these is Outdoor Investment Holdings (a well-run retailer, wholesaler & manufacturer focussing on the outdoor, hunting and safari markets) with other notable investments in diamond mining (land & marine), tertiary educational (health & skincare), vehicle finance & IP-led protective biking equipment.
  • The Group does invest in the listed space when value is present, for example, their investment into RAC Preference shares as a discounted entry-point into Goldrush (amongst the largest domestic alternative gaming business in South Africa).
  • These investments are relatively conservatively valued in NAV (see our analysis and arguments for this in our full report).

Investment Manager & Alignment: RECM Global

  • RECM Global, offers an efficient investment manager that aligns interest with other shareholders through its association with key directors that also personally hold c.22% of Astoria’s ordinary shares.

Valuation, 12m TP & Implied Return: Discounted & Growing

  • Updating Astoria’s NAV to current prices, the share price is trading at a relatively large c.36% discount to it.
  • If we take out our calculated “HoldCo discount” of c.14.6% from this NAV, we arrive at a fair value for Astoria’s shares of c.1170cps or c.25% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity (18.1%), we arrive at a 12m TP of c.1381cps that implies a significant potential return of c.57% from the current share price.
  • Astoria is invested in unique & growing businesses that it values conservatively, which implies a material component driving future returns is likely to be the collective earnings growth of these businesses combined with their high discount rates unwinding.