Piet Viljoen – As a corporate leader Brian Joffe has created an enormous amount of shareholder value

Counterpoint Value Fund manager Piet Viljoen gives us the inside scoop on what is happening in local and global investment markets. The conversation includes an array of topics, with Piet outlining the thesis behind Aveng’s 500:1 share consolidation. Investment-holding structures, PSG and Long4Life, are discussed at length as well as Brian Joffe stepping down as CEO at Long4Life. The commodity counters and global markets’ primary fear, inflation, wrap up the conversation. Justin Rowe-Roberts

On the benefits of Aveng’s 500:1 share consolidation: 

Well, I think the benefit boils down to getting a more realistic or accurate valuation for the business. At the moment, it’s trading between 4c and 6c. There are 50 billion shares in issue if I’m not mistaken. So, this is going to reduce the number of shares outstanding and increase the price per share. The overall value of the company stays exactly the same. But you’ll get more accurate pricing because, currently, the difference between a market cap at 5c and 6c is 20%. Because of the pricing, it’s changing the value of the business by 20% each time it trades between 5c and 6c, which isn’t realistic. I mean, no business value changes by 20% in a short space of time. It just leads to more realistic pricing of the valuation of the business by the market. 

On whether investment-holding companies offer attractive investment propositions: 

At the moment, I believe investment-holding companies are a very attractive investment opportunity. The discounts are quite large. PSG is probably one of the companies with a smaller discount. I mean, companies like Reinet and Remgro are trading well in excess of a 30% discount and some of the smaller companies are also trading at even bigger discounts to net asset value. Those are attractive opportunities, especially where they hold mainly unlisted business that you don’t otherwise get access to. This increases the attractiveness. What’s also good for a company like PSG and some others is where they have a good track record of creating value over time, which you can access at a discount. So, I’d rather access that ability to create value at a discount than buy the underlying at full price. 

On Brian Joffe’s legacy as a corporate leader:

I think Brian Joffe is one of the corporate leaders in South Africa who has created a tremendous amount of value for shareholders. Head and shoulders above many, many others. The old days of Bidvest, he created tremendous value. Long4Life is busy building up again. Unfortunately, for some of the assets, he seems to have overpaid. It has taken more time for that value to come through. But these days 70 is the new 50. I don’t think at 74 you need to retire. I mean, Charlie Munger and Warren Buffett are 90 and 100 years old and they’re still going. You don’t need to take your foot off the gas when you 74 and he’s taking on a chairman role, which he’ll still be involved in the business very actively. It is just a number. You don’t have to worry about that too much. Brian Joffe is one of the value creators in the economy, and it’s worth following him. If you can acquire the shares at the right price, it probably would make a good investment. 

On whether insider trading is a problem for JSE-listed counters:

I don’t know if there is an insider trading issue or whether there has been insider trading in Hulamin or not. I don’t know of that. All I do know is when a company is in talks to be acquired or to make an acquisition or to do some sort of transaction, there are many, many advisers and intermediaries involved. They might mention something to somebody else who might trade on that information, that happens. It has always happened. It’s not a new thing and it doesn’t happen only in South Africa; it’s everywhere in the world. You can look at when there’s corporate action in shares, the share price starts moving before the action is announced. It happens everywhere. 

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