PSG’s share buybacks narrows the discount to NAV

Investment holding company PSG are actively trying to bridge the discount between its share price and the sum-of-the-parts (“SOTP”) value per share, otherwise referred to as the Group’s net asset value per share. The company has repurchased over 3% of the ordinary shares in issue, at a volume weighted price average of approximately R52.48. This displays sound capital allocation from management, as the share price hovers 20% higher, at around R63. PSG holds interests in various listed and unlisted investments. The performance and value of the company is derived from its underlying holdings. After unbundling the group’s crown jewel, Capitec, the share buybacks reveal that management is actively attempting to create shareholder value. Since PSG’s stake in Capitec has been reduced to a solitary 1.48%, the onus now lies on the rest of the underlying holdings such as Curro, Zeder, Stadio and PSG Konsult to drive share price performance. PSG’s share price represents an approximate 33% discount to its SOTP value per share, which is around R94. This has been a perennial problem for investment holding structures. JSE heavy-weights Naspers and Remgro, both investment holding companies, trade at significant discounts to the sum of their underlying holdings. The responsibility lies within management to unlock value for shareholders. – Justin Rowe-Roberts

PSG SENS statement:

General repurchase of PSG Group ordinary shares and update SOTP value per share 

1. General repurchase of PSG Group ordinary shares

At the annual general meeting of the Company held on 17 July 2020 (“AGM”), shareholders, by special resolution, granted a general authority to the board of directors of the Company (“Board”) to repurchase up to 20% of the issued ordinary share capital of the Company, on the terms and subject to the conditions specified in the notice of the AGM.

Shareholders are hereby advised that, during the periods indicated in the table below, the Company repurchased an aggregate of 7 003 688 ordinary shares, representing 3.02% of the issued ordinary share capital of the Company as at the date on which the authority to repurchase the ordinary shares was granted (“Repurchases”). The aforementioned ordinary shares were repurchased for an aggregate value of R367 555 011, funded out of the Company’s available cash resources, which have been bolstered through the further disposal by the group of Capitec Bank Holdings Limited (“Capitec”) ordinary shares so as to reduce the group’s remaining interest in Capitec to 1.48%.

The Repurchases were made in terms of the general authority granted by shareholders at the AGM and were effected through the order book operated by the JSE trading system without any prior understanding or arrangement between the Company and the counterparties. The requirements for the general repurchase of ordinary shares in terms of paragraph 5.72(a) of the JSE Listings Requirements, have been complied with.

A portion of the ordinary shares repurchased has already been, and the remainder will in due course be, delisted and cancelled as the JSE may permit. 

Following the cancellation of these shares, there will be 13 953 770 ordinary treasury shares in issue, with 13 908 770 ordinary shares being held by PSG Financial Services, a wholly-owned subsidiary of the Company, and the remaining 45 000 ordinary shares being held by the PSG Group Limited Supplementary Share Incentive Trust. 

The Company may repurchase a further 39 428 962 ordinary shares (16.98% of the ordinary share capital in issue as at the date on which the authority was granted), in terms of the current general authority, which is valid until the Company’s next annual general meeting.

The impact of the Repurchases on the financial position of the Company is immaterial, as the Repurchases were funded out of the Company’s available cash resources.

2. Updated SOTP value per share 

As previously communicated, in order to provide investors with an up to date indicative SOTP value per share, PSG Group’s website (www.psggroup.co.za) contains an online tool whereby PSG Group’s SOTP value per share is calculated using approximately 15-minute delayed exchange-listed share prices for its listed investments, while all other information (including the valuation of PSG Group’s unlisted investments) is updated when material changes occur. While the SOTP value calculation is indicative of the fair value of PSG Group’s underlying portfolio, it does not take into account factors such as, among others, size of shareholdings, head office operating profit/loss and other potential factors. 

Shareholders are advised that the SOTP calculation contained on PSG Group’s website has been updated to reflect the latest information. 

The SOTP information provided on PSG Group’s website is for general information purposes only and does not constitute an offer to sell any securities or constitute investment advice relating to securities or a representation that the security is a suitable or appropriate investment for any person or warrants any share price value in any form. Investors are advised to give independent consideration to and conduct independent investigation with regards to this information and the value of PSG Group shares, and to obtain investment advice from their independent financial advisors.