RECM and Calibre acquisition chances grow as bad news creates willing sellers
Veteran value investor Piet Viljoen’s listed vehicle, RECM and Calibre (RAC), for the first time in seven years is finding more investment opportunities than it has capital for. RAC’s mantra is "buy good businesses, managed by good people, at good prices", and CEO Jan van Niekerk said that "bad news has created more willingness on the part of owners to have conversations, so where previously we struggled to deploy capital, now there are more businesses available that qualify on our criteria."
RAC, which invests in listed and unlisted businesses, posted a 1.9% gain to R27.86 in its net asset value (NAV) over the previous six months, while year on year its NAV grew 24.3%, against the all share’s 10.2% total return.
Van Niekerk said the group was "confident" that it had enough capital in its existing portfolio for good deals.
Much of its NAV gain is due to the sale of its Dis-Chem shares and the performance of slot-machine business Gold Rush.
Earlier in 2017, RAC took a 17% stake in building supplies company Distribution & Warehousing Network (Dawn), which itself released interim results on Monday, cutting half-year losses to R104.9m, from R366.8m the previous year. RAC said that the turnaround process would be "difficult and take longer than expected" but that it had bought the stock "at a price we believe discounts these risks". The company, which has valued Dawn at R1.12 per share on its books, says although it is uncertain what Dawn is worth, the listed price is "almost certainly wrong".
RACP has also swapped minority stakes in ELB Engineering, York Timbers and Putprop for a foothold in RECM’s new hedge fund. "We started the hedge fund because … there’s a fantastic opportunity to do long-term, deep-value investments in mostly SA Inc-type companies," Van Niekerk said.