Johannesburg - Black-owned investment company Brimstone is focusing on infrastructure as its new area of investment.
The chief executive, Mustaq Brey, said Brimstone’s board and management had concluded this was an area of growth they wanted to explore and it was now a matter of finding the correct assets at the right price.
“We believe that to get to the next level, we are going to have to improve on infrastructure, not just on a country basis but on a regional basis as well,” Brey said.
Brimstone’s focus sectors have been mainly food, financial services and health care. It has conveyed clearly that it will always steer clear of gambling and alcohol.
The company has made its fair share of investment mistakes. At one stage it was invested in nearly 30 groups but these have shrunk to 16.
“We’ve learnt from the past. And now we’ve got a very thorough internal process. It’s a tedious process but it has helped us in making the right decisions,” Brey said.
Brimstone now has a team of four internal analysts who first look at an asset. They then have to convince the company’s executives that it is the right asset at the right price before any suggestion is made to the investment committee, which has four independent members. The proposal is then passed to the board.
Although Brey was happy that Brimstone had picked some winners on the JSE, such as Life Healthcare, Oceana, Nedbank and Old Mutual, the share performance of some investments in the year to December was less impressive.
Tiger Brands, Taste Holdings and the Rex Trueform and African & Overseas businesses recorded combined declines in fair value of R136.3 million.
Total fair value gains of the group’s 14 listed stocks came to R557m in the 12 months to December last year compared with R1.05 billion in 2012. The biggest contributor to the fair value gains was Life Healthcare’s R428.5m, although this was down from phenomenal gains of R732.2m a year earlier.
But Brimstone said it would hold on to its investments.
“We are long-term players. We are not looking to make quick money over the first three years. We quite understand that we might not get the best returns at first and that there may be volatility,” Brey said.
When Brimstone bought into Oceana in 1995, for instance, its shares were priced at R2.62. They are now priced at around R82.
Brimstone’s investments in Nedbank and Old Mutual will mature in January and May 2015, respectively.
The companies have not yet given Brimstone an indication as to whethert they will extend its black economic empowerment participation.
But Brey said the maturity presented an opportunity to free up some capital and put it into new investments.
Brimstone reported an intrinsic net asset value of R4.2bn, or R17.09 a share, at year end, a 16 percent increase from December 2012.
But its profit for the year shrank to R473m from R842m as fair value gains decreased by 47.1 percent.
Operating profit of R64m was less than half of the R131m reported a year earlier.
Basic headline earnings fell to R461m from R844.4m, translating to basic headline earnings a share of R1.899, down from R3.481 a year earlier.
Brimstone declared a final dividend of 30c a share and a special dividend of 10c a share. The stock fell 3.69 percent to R13.50 in very thin trade. - Business Report