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Rain buoys ARC
Rain buoys ARC
Published Date: 2020-03-20 | Source: Stephen Gunnion | Author: Stephen Gunnion
The investment group has grown its intrinsic value during a turbulent period thanks to an increase in the value of the data network operator.
African Rainbow Capital (ARC) says the first half of its financial year was characterised by challenging economic conditions which impacted most of the companies in its portfolio. These included low consumer demand and weaker business and investor confidence.
Despite the tough environment, the investment group grew its intrinsic value by 1.9% between June and end-December to R9.93 billion, thanks to a R183 million increase in the fair value of its investment in data network operator Rain. Its intrinsic net asset value per share rose 3.4% to R9.52 at the end of December from a year earlier, remaining below its medium to long-term target of 16% growth a year. However, it said it was encouraging that its portfolio managed any growth at all given the current economic environment.
The group effectively invests in companies through its interests in the ARC Fund, which acquires significant minority equity interests in established and start-up businesses. The intrinsic value of the Fund increased by 5.8% to R9.9 billion over the six months, with net acquisitions and disposals amounting to R339 million. Investments included the further injection of capital into TymeBank, a stake in specialist financial services firm Capital Legacy and additional shares in Kropz Plc, a holding company listed on London's AIM. It disposed of shares in Santam for R120 million, raising a R21 million profit. Following the end of the reporting period, it announced an additional investment of 15% in Alexander Forbes.
ARC's investments are separated into divisions that include Telecommunications, Mining, Construction and Energy, Business Process Outsourcing, Agriculture, Property and Diversified Financial Services.
About half of the ARC Fund's portfolio is invested in early stage businesses such as TymeBank, Rain, and Kropz, a plant-nutrient producer, and its Kropz Elandsfontein phosphate mine. It has a number of other investments, listed and unlisted. At year-end, cash resources available in the fund for further investment amounted to R437 million.
The company said the challenging operating environment for its investments was likely to persist over the short to medium term as the global economic slowdown added to weakness at home.
The group's shares gained 0.9% to R2.16 yesterday.
ARC Invest reckons NAV is now R9.52 - share closed at R1.95 yesterday ... helluva discount! https://t.co/EEnrULu0Of-- Marc Ashton (@zamarcashton) March 19, 2020