While it would seem that investors
are not questioning the quality of
Brait’s assets, there are questions
around its current valuation.
The chart below shows Brait’s
price to book value, which is
management’s valuation of
underlying assets. It shows that the
current share price is rich, relative
to history (See: Figure 2.)
The share was trading at R116.95
on Monday June 28th, a significant
premium to the R77.12 NAV
that Brait calculated as of March
31st 2015.
This may be true, as the sale of
Pepkor demonstrated (it was valued
by Brait at 8.5x ebitda and sold to
Steinhoff on 20x ebitda). However
one could argue that a fair portion
of the valuation is now made up
of New Look and Virgin, which are
valued at market value (as these
just traded).
“This could be for one of three
reasons,” says Maqubela. “Investors
are willing to pay a premium for
management’s deal making abilities.
Or they believe Brait management
under-paid for these acquisitions.
Or the market is betting that
management will extract more
value from these businesses.”
The market is clearly willing to pay
over the odds for Brait.
Whatever your views on the
valuation, the second chapter will
undoubtedly be interesting. ■
“Investment holding companies of
this nature have seldom traded at
a premium. If one considers the
classic example in the SA market,
Remgro, it generally trades around
a 15% discount,” says Beelders.
Some investors believe that Brait
trades at a premium to its NAV,
because management is too
conservative in arriving at this NAV,
he says.
12
ISSUE 4 – JULY 2015
John Gnodde, Brait managing executive