Brimstone feels the burn, but adds to investments

There was a value crimp at empowerment group Brimstone Investment Corporation in the six months to end-June, but the company remained on the front foot by making additional investments totalling nearly R700m in the interim period.

The bulk of these investments involved adding to an existing significant minority holding in private hospitals group Life Health as well as backing deal-making doyen Brian Joffe’s recently listed Long4Life venture.

Brimstone CE Mustaq Brey said the company’s deal team was assessing new opportunities, but he stressed that pricing remained an issue. “People have their views about value, but we are only prepared to pay up for a really good asset.”

Overall, Brimstone experienced an 11% drop in intrinsic net asset value (NAV) to R4.5bn, or R18.84 per share, in the half-year to end-June. Intrinsic NAV is the most appropriate gauge for measuring performance in an investment counter. Based on the end-June intrinsic NAV figures, Brimstone’s ordinary and N-shares offer a discount of more than 30%.

Brimstone reported large markdowns in the value of key investments in fishing counters Oceana Group and Sea Harvest, which recently listed, in the interim period.

The company valued its 17% stake in Oceana at R1.26bn — well down on the R2bn valuation accorded to the investment at the end of December 2016.

The value of the 54.9% stake in Sea Harvest dropped to R1.89bn (R2.23bn at the end of December 2016).

The investments in Sea Harvest and Oceana make up more than 45% of Brimstone’s intrinsic NAV.

Oceana and Sea Harvest have diversified strongly into offshore waters — the former via Louisiana-based fish oil and fishmeal specialist Daybrook and the latter through a controlling stake in Australian seafood business Mareterram.

Brimstone was also hit by poor performances in smaller operational subsidiaries such as short-term insurer Lion of Africa and clothing manufacturer House of Monatic.

Brey said the downward valuation of certain Brimstone investments was not entirely unexpected in the prevailing economic climate.

Brimstone’s strategic investments in property group Equites, Long4Life and empowerment scheme Phuthuma Nathi had gained markedly in value in the interim period.

Dividends received in the interim period dropped to R73m compared with the R95m received in the corresponding period in 2016.

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