Tag Archives: sabvest capital

Sabvest Capital – H1:24 Results – Returning to Growth

Share Code: SBP – Market Cap: R2.9bn – Dividend Yield: 1.2%

Sabvest Capital – Results Note – H1:24Download

H1:24 Results: NAV Returns to Growth

  • Sabvest’s Net Asset Value (NAV) grew +3% y/y to 11786cps (H1:23 – 11465cps), management hiked the Group’s dividend to 35cps (H1:23 – 30cps), and bought back a further R51.7m shares during the period (average price of c.6893cps versus the NAV of 11786cps and the current share price of 7450cps).
  • Many of the Group’s underlying businesses recovered/grew nicely: Apex, Flexo and ITL all performed well while Corero’s share price more than doubled, and Transaction Capital unbundled We Buy Cars Holdings (JSE code: WBC).
  • On a balance, the Group’s portfolio outlook is good, its valuations are proving conservative (see ‘Thoughts’ below) and management is steadily degearing as cash is realized and/or flows centrally.

Thoughts: Exits Underscore Conservative Valuations

  • Sabvest has (1) agreed to exit Metrofile in two tranches at an above-market price (301cps), (2) received an initial R80.6m from its exit of Sunspray (at above-book at the time), & (3) concluded an exit from Rolfes that should be at a premium to its previous value in the Group’s NAV.
  • This is c.6% of assets being realized at above-book prices (proceeds should go into degearing) and it goes to evidence Sabvest’s conservative unlisted valuations.

Valuation, 12m TP & Implied Return: Discounted

  • The share is trading at a c.37% discount to NAV, which is well off from the JSE-listed peer group average discount particularly when compared based on Sabvest’s superior track record (i.e. the Line-of-Best-Fit below).
  • Using our updated NAV (with the latest market prices) we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10754cps (previously: 9817cps), which still includes a HoldCo c.10% discount against this NAV (unchanged from prior period).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 12616cps (previously: 11675cps) with an implied return of +69%.
Sabvest Capital – Results Note – H1:24Download

Sabvest Capital – H1:23 Results – Growth Despite Tougher Period

Share Code: SBP – Market Cap: R2.8bn – Dividend Yield: 1.3%

Sabvest Capital – Results Note – H1:23Download

H1:23 Results: Fully Invested

  • Sabvest grew its Net Asset Value (NAV) by +10.4% y/y to 11465cps (H1:23 10388cps) and maintained its interim dividend at 30cps (H1:22 – 30cps).
  • The Group is fully invested and, indeed, has several investment disposals in progress. With net debt at c.10% of gross assets, we expect realizations to be applied (somewhat) to degearing.
  • Management expects moderate growth in NAV per share for the full FY 23E period.
  • Note (below) how unlisted valuation multiples have remained flat over the period.

Sources: Sabvest, Iress, Profile Media, various company reports, & Blue Gem Research workings & assumptions; *Valuation performed by Masimong management predominantly based on Discounted Free Cash Flow methodology. **Average between subsidiaries’ multiples (4.5x and 6.0x).

Thoughts: More Nuanced Performances from Investees

  • While H1:23 was generally a tougher trading period for underlying businesses, particularly Apex, ARB and SA Bias all performed strongly and saw good growth in their earnings and, thus, resulting valuations.
  • Somewhat offsetting this, Halewood saw a cyclical adverse product mix and ITL continued to be buffeted by macro headwinds in the global apparel supply chain causing both to underperform. Both these businesses are good quality, and, in time, we expect these headwinds to abate, normal growth to continue and their respective contributions to Sabvest’s NAV to rise accordingly.

Valuation, 12m TP & Implied Return: 40% discount to NAV

  • Updating the Group’s NAV for the latest market prices we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10060cps (previously: 9227cps), which still includes a HoldCo c.13% discount against this NAV.
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 11920cps (previously: 10906cps) with an implied return of +73%, excluding dividends.
  • Beyond the above numbers and implied returns, the fact is that the Group’s share price (6900cps) is currently at a large c.40% discount to what we estimate its current NAV is (11534cps). Given the Group’s track record, quality of NAV and prospects, we find this large discount strange.
Sabvest Capital – Results Note – H1:23Download

Sabvest Capital – FY 22 Results – Exciting Prospects

Share Code: SBP – Market Cap: R3.2bn – Dividend Yield: 1.1%

Sabvest Capital – FY 22 Results NoteDownload

FY 22 Results: Better than Expected

  • Sabvest Capital’s NAV grew 17.6% y/y to 11017cps beating our expectations, the Group’s HEPS was firm at 1591.2cps (FY 21: 1689.7cps) and management has materially lifted the dividend to 90cps (FY 21: 75cps).This was a busy period with a range of new investments from ARB Holdings, Halewood to Valemount Trading.
  • The Group’s investee companies executed various underlying investments from Apex buying into DRA Global to SA Bias’ Flowmax acquiring YG Prefab in the UK.

Thoughts: Exciting Portfolio Prospects

  • While ITL’s may be the only duller spot in Sabvest’s portfolio (longer-term, though, we are very optimistic about this group’s prospects), DNI-4PL is firing all cylinders, SA Bias is performing strongly, and Apex Partners is fast growing into a material investment for the Group.
  • ARB Holdings is benefitting from the boom in solar, Halewood and Valemount Trading both hold immense potential for profitable expansion from their positions in the RTD/beverage and pet industries respectively.

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

  • Updating the Group’s NAV for the latest market prices we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 9227cps (previously: 8894cps), which still includes a HoldCo c.14.5% discount against this NAV.
  • Importantly, the underlying NAV appears to be conservatively valued and management’s track record for growth is well above average. These two factors combine favourably to form the Group’s investment appeal, particularly when offered at a discount (we estimate the share price currently offers a c.25% discount to NAV).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 10906cps (previously: 10511cps) with an implied return of +35%, excluding dividends.
Sabvest Capital – FY 22 Results NoteDownload

Sabvest Capital – H1:22 Results – Better than Expected

Share Code: SBP – Market Cap: R2.9bn – Dividend Yield: 1.0%

Sabvest Capital_- Results Note – H1:22Download

H1:22 Results: Better than expected

  • Sabvest’s Net Asset Value (NAV) grew +10.9% p/p and +26.1% y/y to 10388cps (FY 21: 9371cps) driven by strong performances almost across all its investments that beat our full-year estimates.
  • The Group concluded investments in ARB Holdings and Halewood International South Africa during the period.
  • Despite this investment activity, the Group received good dividend flows, remains relatively lowly geared and management has declared a +50% y/y growth in dividend to 30cps (H1:21 – 20cps).

Thoughts: H1:22 growth likely to continue in H2:22E

  • ARB Holdings and Halewood are currently being carried at cost. While we expect operational growth in ARB to carry this investment value upwards, Halewood’s investment price appears quite conservative, and we expect both operational and re-rating to lift this valuation going forward.
  • Likewise, DNI-4PL, Masimong & Apex are all growing quickly, ITL Holdings’ global group has recovered strongly and SA Bias’ Flowmax appears to be on the front foot for acquisitions.
  • Finally, coupled with Sabvest’s superb capital allocation, relatively lowly-geared centre and its ability to buy-back its own shares below NAV, and it is likely that the good growth rate in H1:22 carries comfortably into H2:22E (and beyond).

Valuation, 12m TP & Implied Return: Lots of value available

  • Updating the Group’s NAV for the latest market prices & taking out our present valued “HoldCo discount”, we arrive at a defendable (post-discount) fair value for Sabvest Capital shares of 8894cps (previously: 7487cps) or +22% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we see the Group’s 12m TP as 10511cps (previously: 8825cps) with an implied return of +44%.

Refer to our Initiation of Coverage for more background.

Sabvest Capital_- Results Note – H1:22Download

Sabvest Capital – FY 21 – Great Performance with More to Come

Share Code: SBP – Market Cap: R2.4bn – Dividend Yield: 0.6%

Sabvest Capital – Results Note – FY 21Download

FY 21 Results: Strong NAV growth, large hike in dividend

  • Sabvest’s FY 21 Net Asset Value (NAV) per share grew by +26% y/y to 9371cps (FY 20: 7444cps), adding to the Group’s fantastic track record as it has compounded NAV per share (excluding dividends) at +16.9% CAGR for a decade & a half!
  • Updating this NAV (keeping unlisted valuations flat), we see the current share as trading at a c.37% discount. This is despite JSE-listed HoldCo’s average discount-to-NAV being c.30%, and despite most of these other HoldCo’s having a worse track record than Sabvest. Using this peer-average discount, Sabvest shares should be trading closer to 7000cps.
  • Sabvest hiked its dividend to 75cps (FY 20: 25cps) as its balance sheet remains comfortably capitalized.

Thoughts: “Quality” growth in NAV, more likely to come…

  • As most of Sabvest’s investments are unlisted (c.86% of NAV), it is important to emphasise that the growth in NAV is not due to rising valuation multiples (all valuation multiples are flat from FY 20). The growth in NAV was driven by earnings growth &, therefore, we consider it “quality growth”.
  • As investee companies are trading at-or-better than 2019 pre-COVID levels, we expect continuing NAV growth in FY 22E.

Valuation, 12m TP & Implied Return: Lots of value available

  • Updating the Group’s NAV for the latest market prices & taking out our present valued “HoldCo discount”, we arrive at defendable (post-discount) fair value for Sabvest Capital shares of 7487cps (previously: 6826cps) or +19% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we see the Group’s 12m TP as 8825cps (previously: 8000cps) with an implied return of +40%.
  • All these measures exclude the potential upside from the ARB Holdings delisting, Apex’s Ascendis Medical deal & any Rand weakness going forward that will lift hard currency valuations.
  • Refer to our Initiation of Coverage for more background.
Sabvest Capital – Results Note – FY 21Download