Tobacco weighs on Reinet’s value

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Tobacco weighs on Reinet’s value

Published Date: 2019-05-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tobacco weighs on Reinet’s value

The investment vehicle has spent €68 million buying back its own shares to try to narrow the 42% discount it trades at.

A fall in British American Tobacco's (BAT) share price has dented the value of Reinet Investments, the vehicle that was created out of the 2008 restructuring of Richemont.

The investment group's net asset value fell 5.8% to €297 million in the year to end-March as BAT's share price declined by 23% to £31.94. That's reduced BAT's contribution to Reinet's net asset value (NAV) to 52.2%, down from 62.4% a year ago and 70.8% in 2017. While the cigarette maker has continued its strong underlying performance following the acquisition of Reynolds American, Reinet says uncertainty over changes to the industry and regulatory developments are weighing on its share price. Still, it believes the group remains an attractive long-term investment.

To address the large discount Reinet continues to trade at relative to the intrinsic value of its underlying assets, which also include Pension Insurance Corporation and a number of private equity investments, it's been buying back its own stock. Following approval from shareholders last August to repurchase up to 20% of its shares, it spent €68 million on just over 5-million shares. So, while its net asset value fell 5.8% in the year to end-March to €297 million, its net asset value per share fell by a lesser 3.3% due to the buybacks.

It said Pension Corporation continued to perform well, writing some £7.1 billion of new business in 2018, up from £3.7 billion in 2017. It's embedded value increased by 24% to £3.6 billion. It now represents 30.6% of Reneit's NAV, compared to 25.4% a year ago.

Over the year, it committed €223 million and invested a total of €250 million in new and existing portfolio assets, including an investment in Grab Holdings, a Singapore-based technology company offering ride-hailing transport services, food delivery and payment solutions in Southeast Asia. It also supported the launch of the Prescient China Equity Fund with a €44 million investment.

It's raised its dividend by 5.6% to €0.19 per share. Its shares rose 1.5% to R233 yesterday.





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