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2018 AGM21 November 2018
1
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Mar
-11
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-11
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1
Sep-
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-11
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-12
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RMH’S TRADING DISCOUNT TO NAV
Average: -0.3%
Source: Reuters, RMH financials. Based on the intrinsic value methodology used in the RMH integrated annual report and updated based on the listed value of FirstRand.
Average: 5.1%
Average: 12.9%
PREMIUM / DISCOUNT TO INTRINSIC VALUE SINCE RMI UNBUNDLING
2
LONG-TERM PRICE / INAV EVOLUTION OF HOLDCOSGlobal investment holding companies are under pressure, SA holding companies trending to internationals
0.6x
0.8x
1.0x
1.2x
1.4x
Jan-
10M
ay-1
0O
ct-1
0Fe
b-11
Jul-1
1N
ov-1
1Ap
r-12
Aug-
12Ja
n-13
May
-13
Oct
-13
Feb-
14Ju
l-14
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-14
Apr-1
5Au
g-15
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ay-1
6O
ct-1
6Fe
b-17
Jul-1
7N
ov-1
7Ap
r-18
Aug-
18
Pric
e / I
NA
V
Average of peers SA HoldCo average Intl HoldCo Average RMH
Current Movement(last 3 years)
Average(last 3 years)
Movementsince 2010
Averagesince 2010
Local investment holding companies
1 RMI 0.93x (5.8%) 1.00x N.a. 1.03x
2 RMH 0.85x (14.5%) 0.92x (8.8%) 0.96x
3 Remgro 0.80x (8.1%) 0.81x (5.2%) 0.86x
4 Naspers 0.70x (35.2%) 0.83x (42.4%) 1.13x
5 Reinet 0.67x (10.4%) 0.67x (28.6%) 0.74x
6 Brait 0.70x (45.9%) 0.91x (59.9%) 1.37x
7 PSG Group 0.87x (38.4%) 1.02x (9.8%) 1.00xInternational investment holding companies
8 Kinnevik 0.83x (9.4%) 0.86x 24.8% 0.82x
9 Exor 0.60x (40.2%) 0.72x 19.4% 0.71x
10 Itausa 0.78x (3.3%) 0.79x (13.4%) 0.86x
11 Pargesa 0.67x (5.3%) 0.69x (23.9%) 0.74x
12 Wendel 0.70x (9.7%) 0.75x (10.8%) 0.73x
Average of peers 0.76x (21.5%) 0.83x (19.6%) 0.91x
SA HoldCo average 0.79x (25.3%) 0.88x (28.8%) 1.02x
Intl HoldCo Average 0.72x (14.9%) 0.76x (4.1%) 0.77x
Source: Deutsche Bank, Factset, Company annual reports. Data as at 30 October 2018.Note: Naspers does not disclose intrinsic value of unlisted investments therefore INAV is based on value of Tencent Holdings only (other assets are assumed to be immaterial)
Widening discounts are a global investment holding company trend driven by specific and general factors including: shifting perceptions of holding company structures, realisations of intrinsic value being impacted by weak IPO and M&A markets and a renewed market emphasis on corporate focus
3
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1,000
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Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Original funding and interest FirstRand Total Return
24%
53%
10%
13%Admin expenses (eg. staff costs, professional fees)
FirstRand funding cost
RMH Property funding cost
Hedging (RMI shares acquired as asset)
LOW STRUCTURAL FRICTION COSTS
BREAKDOWN OF NET DIVIDEND RETAINED1 (2011 – 2018)
ADDITIONAL FIRSTRAND SHARES PURCHASED IN MARCH 2011 HAS RESULTED IN R2.9bn IN ADDITIONAL VALUE (AS AT 30 JUNE 2018)
Net value created: R2.9bn
1. Difference between the dividends received from FirstRand and the dividends paid out by RMH for the period June 2011 to June 2018
June-11 June-12 June-13 June-14 June-15 June-16 June-17 June-18
4
0
200
400
600
800
1,000
1,200
Nov
-08
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FIRSTRAND RMH BANKS Index Bank A Bank B Bank C Bank D
RELATIONSHIP WITH FIRSTRAND
FIRSTRAND VS REST OF TOP FOUR BANKS, PE (10-YR)
FIRSTRAND HAS OUTPERFORMED COMPARABLE PEERS (10-YR)
0
5
10
15
20
Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18
FSR Other Top 3 Banks
Nov
-18
Reb
ased
to 1
00
Source: Reuters as at 15 November 2018 and company reports
25%
23%
18%
13%
12%
14%
17%
CAGR
5
LONG-TERM PERSPECTIVE
A critical anchor for FirstRand • RMH and FirstRand acknowledge that a mutually beneficial relationship exists between the groups
• As founding shareholder, RMH provides FirstRand with the vital stability and cultural tone required for FirstRand to prosper
• Through representation on all relevant forums, RMH plays a critical role in providing both technical and strategic guidance
Supports long-term benefits, providing opportunity for:
• Stability: secure access to capital with limited pressure for capital release given the long term focus
• Flexibility: in the 1998 creation of FirstRand, RMH was, via a minority shareholding, able to infuse FNB and WesBankwith its culture and management style
• Building businesses: the stability and strategic input to enable the building of businesses such as OUTsurance and Discovery, including the financial capability to fund “emergencies and opportunities”
• A vantage point: the structure provides for a leveraged investment, and influential vantage point vis-à-vis FirstRand
1
2
THE RELEVANCE AND VALUE OF THE RMH STRUCTURE REMAINS
RMHPROPERTY’S
STRATEGY
7
936 1,348
4,064 4,094 4,094 4,001 3,991
-
2,000
4,000
6,000
8,000
FY17 FY18 FY19 FY20 FY21 FY22 FY23
Net capital invested Gross intrinsic value
RMH PROPERTY | FOUNDATIONS IN PLACE FOR GROWTH
RMH PROPERTY (RMHP) HAS DEPLOYED c.R2.2bn IN EQUITY CAPITAL TO DATE
CORE PARNERSHIP SATELLITE PARTNERSHIPS
27.5% stake 43.9%1 stake9.0% stake
18.2%1 stake
Fund 1
ATTERBURYBUCHAREST
50%1 stake
20.0% stake
Fund 2
50.0% stake
Fund 3
RMHP GROSS INTRINSIC VALUE RMHP NET INTRINSIC VALUE2
2,067
6,544 7,364
10,963
FY18 FY23 -Conservative
FY23 - Basecase
FY23 -Optimistic
CUMULATIVE CAPITAL INVESTED3
715
2,442
3,262
6,861
FY18 FY23 -Conservative
FY23 - Basecase
FY23 -Optimistic
Notes: Figures in millions of rands; 1. Direct stake only 2. Headline earnings excl. revaluation gains and losses; 3. Cumulative cash out less dividend inflowsSource: Company reports; RMH analysis
8
RMH PROPERTY’S STRATEGY
• Best-of-breed management team• Scalable development operation diversified across traditional property asset
categories (office, retail, industrial)• Sizeable capital base in an unlisted vehicle providing scope and opportunity to
increase development potential of the portfolio• Liquid vehicle to potentially monetise property interest in the future
• Ability to partner with best-of-breed specialist developers on a portfolio and/or asset specific basis in key niches of the property market
• Allows for diversification of RMHP’s portfolio• Satellite partnerships may achieve higher yields / faster NAV growth than the
more traditional core partnership• Flexibility to partner with developers on single assets or entire portfolio
Rationale for Core Partnership
Rationale for Satellite Partnerships
International
Domestic
Domestic
CORE PARTNERSHIP: Target NAV R5-10bn1
SATELLITE PARTNERSHIPS: Target NAV R1-5bn1
• Atterbury Property Holdings is RMHP’s core domestic partner
• RMHP has and will support further investment being made by Atterbury directly
• Atterbury Europe is RMHP’s core partner in Europe (initial investment via Brightbridge)
• RMHP has and will support further investment being made by Atterbury Europe directly
• RMHP has satellite partners with specific focus areas which include:
Note: 1. Target collective value of RMHP’s stakes in domestic and international partnerships
• The RMH Property investment strategy primarily focuses on development focused businesses with returns driven by capital growth (measured by intrinsic value)• This contrasts with most JSE-listed property companies that have portfolios primarily skewed towards more mature yielding assets with predictable cash flows and
consistent dividends• In the medium-term, RMHP will target a 15-20% p.a. gross equity return on a portfolio wide basis driven by:
‒ Development profits and other capital growth
‒ Stable yields on completed assets
9
WHERE TO NEXT FOR RMH PROPERTY
Investment in Romania alongside Atterbury Europe
• In Q3 2017, the RMH Board approved a JV opportunity with Atterbury Europe in Bucharest
• The project encompasses a broad precinct of development in Bucharest focused on developing a new hub for business, entertainment, retail and
residential living. The precinct will include eight premium grade new buildings, the redevelopment of two existing structures and a large public
recreational area
• RMHP invested c. R0.7bn in Nov-18. A further c. R1.8bn has been committed for Atterbury Bucharest for deployment in FY19 (subject to conditions)
• R150m was invested in Divercity in October 2018
• Post the deployment of the committed capital set out above, RMH Property will be entering a period of consolidating its stable of investments toensure strong foundation for future growth. No further investments are contemplated
• In collaboration with its core partner (Atterbury) as well as the satellite partners, the focus of the business will shift to value maximisation from theexisting portfolio
• RMH is assessing options for its interest in RMH Property that may include a structural liberation of RMH Property from RMH at the appropriate time
COMPLETION OF CURRENT EQUITY CAPITAL COMMITMENTS
WHERE TO NEXT FOR RMH PROPERTY
• Committed balance sheet support/guarantees to portfolio companies of c. R2.3bn for an initial tenor of 3-5 years
• Funding support is intended to catalyse medium-term growth in RMH Property investees by supporting development initiatives
• Guarantee capacity utilised for the benefit of investees typically earns RMH Property a guarantee fee
• This facilitation is seen as a contributor to the overall targeted gross equity return of 15% - 20% p.a.
FACILITATED FUNDING SUPPORT
10
TIMELINE RELATING TO ATTERBURY EUROPE
June ‘15 Dec ‘15 June ’16 Dec ‘16 Sept‘17 Dec ‘17 June ‘18
July-16: RMHP acquires 27.5% stake in Atterbury
Property Holdings and 10% stake in Brightbridge
Oct 14 - June-15: Brightbridgeacquires 80% stake and
Atterbury Property Holdings and Athol Street Holdings
acquire 10% each in COOP
Oct 14 - June-15: Atterbury Europe B.V. is incorporated, with COOP owning 50% and
50% held by Steinhoff International Holdings N.V.
through Hemisphere
Dec-17: Atterbury Europe B.V. repurchases 50% of its ordinary shares held by Steinhoff Europe
A.G. utilizing funds Atterbury Europe B.V had deposited with Steinhoff Europe A.G.. COOP
thereby becomes a 100% shareholder of Atterbury Europe
B.V.
Feb-18: RMHP subscribes for 43.9% of the shares in Atterbury Europe Holding
B.V.
Feb-18: Atterbury Europe Holding B.V. is
incorporated, holding 100% of the shares in Atterbury
Europe B.V.
June-18: Following an offer process, Atterbury
Europe B.V. repurchases the perpetual preference shares held by Steinhoff
Europe A.G.
June‘14 Dec ‘14
June-14: Brightbridge is incorporated and acquires
stakes in AttAfrica Ltd, New Waverley Holdings Ltd and
EnAtt Ltd
“Brightbridge”: Brightbridge Investments Limited“COOP”: Atterbury Onroerend Goed Houster Europa Cooperatief U.A.“Hemisphere”: Hemisphere International Properties B.V.
Sept-17: Steinhoff International Holdings N.V. transferred its
shareholding in Atterbury Europe B.V. from Hemisphere to Steinhoff
Europe A.G
11
ATTERBURY EUROPE** | OWNERSHIP STRUCTURE
43.9%
Holding B.V.
Property Holdings
Onroerend Goed Houster Europa Cooperatief U.A.
B.V.
72.5%
10%
56.1%
100.0%
Atterbury Europe
Debt instrument*Athol Street
Holdings Limited
10%
Equity instrument*BrightbridgeInvestments
Limited
Management related entities
10%
90%(a)
80%
(a) ‘Management related entities’ include management, staff and founders of Atterbury Property Holdings. The balance is held by third parties that RMHP has verified, based on RMHP’s due diligence performed at the time of the transaction, are not related, whether directly or indirectly, to Markus Jooste or Steinhoff.
* Financial instruments which, over time, could result in an increased direct shareholding. At this stage, the possible increase in shareholding is not quantifiable or certain.
** Atterbury Europe has no tenant nor property exposure to Steinhoff.
27.5%
73%(a)
12
DISCLAIMER
The information contained in this document has been prepared by the RMH Board for illustrative purposes only
No information, including any financial information, set out in this document should be construed as a trading update, profit forecast or estimate or an
expectation regarding future performance of the company or prediction of market conditions which may impact the company
The information should not be regarded as advice nor a recommendation to investors or potential investors in relation to holding, selling or purchasing
RMH shares and does not take into account any investor’s particular investment objectives, financial situation or needs
Before acting on any information investors or potential investors should consider the appropriateness of the information having regard to these matters
and should seek independent financial advice regarding in which manner the information may affect their particular investment situation