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JOHANNESBURG - Last week was one of the most upsetting in recent JSE history. South Africans are mourning the destruction of wealth caused by Steinhoff.

One of the victims was the share price of PSG.

Early in the week, it reached a new record high just below R300, and then dropped by more than 15 percent on the back of the Steinhoff debacle.

PSG’s only sin is that Steinhoff holds a 25.5 percent stake in PSG, and Markus Jooste (now ex-chief executive of Steinhoff) sat on the board of directors as a non-executive, before resigning from all his directorships last week.

Sadly, PSG was also named and shamed (entirely unnecessarily) by an influential asset manager.

It was done with a subtle play of words that gave the impression to the public and investors that PSG has something to do with the Steinhoff meltdown.

Some former directors and shareholders of PSG exchanged some of their holdings in PSG for Steinhoff, in a deal that had nothing to do with PSG or their employees.

This was done in their personal capacity. In a SENS announcement on Friday afternoon, the PSG Group stated:

“Steinhoff exercises no operational or investment control over PSG Group whatsoever.

"In addition, PSG Group and Steinhoff do not have any interrelated transactions or ventures.

"Accordingly, PSG Group’s operations and its investment portfolio are in no way impacted by the events impacting Steinhoff. The board of PSG Group is disappointed about what has transpired at Steinhoff.”

Holding company

PSG is an investment holding company consisting of underlying investments that operate across a diverse range of industries.

These include banking, education, financial services, and food and related business, as well as early-stage investments in growth sectors.

PSG is valued by calculating the sum of the parts (SOTP) of all the investments it owns.

This information can be found on its website, which is updated daily.

Most of its holdings are in listed entities, where the price is made on a continuous basis - therefore the value of PSG is quite simple to calculate.

Eighty-seven percent of the SOTP is represented by four listed entities.

The most significant holding is Capitec, representing 54 percent of PSG, then Curro at 15 percent, PSG Konsult at 11 percent and Zeder, representing 7 percent.

On Friday, the SOTP value was R270 per share, versus the JSE share price of R249.

The discount is therefore 7.8 percent.

In the last few years, PSG (different to other investment trusts) often traded above the SOTP value, due to PSG's reputation for choosing its investments carefully and being right most of the time.

When the discount widens to more than 5 percent, it is usually a buying opportunity.

The underlying businesses of PSG have good prospects and are managed very well.

According to the February 2017 annual report, PSG’s total return was 49.5 percent per annum over the approximate 21-year period since its establishment.

Untarnished reputation

Had you purchased R100 000 worth of PSG shares in November 1995 and reinvested all your dividends, your investment would be worth around R524m today.

The same investment in the JSE All Share Index over this period would only be worth R1.8m.

PSG has created enormous wealth for its shareholders and has an untarnished reputation.

I cannot see any specific reason why it will not continue in the same way.

One reason why the share could be under pressure is because of the possibility of Steinhoff selling its stake in PSG.

This could create an overhang in the market, but due to the reputation of PSG's management team, it can be expected that this will be handled in a constructive way.

Amelia Morgenrood is an employee of PSG Konsult, a subsidiary of the PSG Group. She has no inside information and has access only to the published information of the last week. Her opinion is based purely on information available to the public.

The views expressed here are not necessarily those of Independent Media.