Marc Hasenfuss Editor-at-large
Jannie Durand. Picture: HETTY ZANTMAN
Jannie Durand. Picture: HETTY ZANTMAN

 

Remgro, the R150bn investment giant controlled by the Rupert family, appears to be developing a strong connection with Community Investment Ventures Holdings (CIVH) — an empowerment group with a technology bent.

CIVH’s main asset is Dark Fibre Africa (DFA), which builds, installs, maintains and finances fibre-optic networks across SA.

By the end of September last year DFA — which started operations in 2007 — had rolled out 9,503km of fibre network in major metropolitan areas and on long-haul routes

In the interim period to end-December, Remgro invested another R329m into CIVH (via a rights issue), pushing its stake in the company to 51%.

While the investment in CIVH/DFA is one of Remgro’s smaller holdings, it must rank as one of the best investments the group has made in the past decade.

The value of the CIVH investment was pushed up 23% to R3.9bn in the interim period, with DFA’s contribution to Remgro’s headline earnings increasing 25.7% to R44m.

Remgro’s investment presentation showed that DFA increased revenue 37% to R734m and Ebitda (earnings before interest, tax, depreciation and amortisation) by 43% to R495m.

Remgro CEO Jannie Durand says DFA’s improved results are mainly as a result of the solid growth in annuity income of 29%.

Annuity stems from renting and maintenance of the fibre optic network. Corporates are the main customers, but so is pretty much anyone who wants fast Internet.

DFA’s annuity income is in excess of R101m/month. The book value of the fibre-optic network is estimated at more than R7.4bn.

Durand estimates the future value of DFA’s current annuity contract base is in excess of R18bn.

Remgro’s quandary — as regards its interest in CIVH/DFA — is that the investment is overshadowed by its mainstay portfolio of listed holdings like Mediclinic International, FirstRand/RMB, Distell, RCL Foods and RMI.

At the recent investment presentation there was a question around whether Remgro would bundle its fast-growing smaller investments into a separately listed vehicle — as had been done in the late 1990s with Venfin (which held the group’s stakes in Vodacom, e.tv and Dimension Data).

In terms of a possible technology specialist infrastructure hub, it’s worth noting that Remgro also owns a 30% stake in Seacom, the undersea cable specialist. In terms of the agreement between Seacom’s shareholders, only limited financial disclosure is allowed. Seacom’s headline loss of R18m (2015: R28m) was mainly due to a change in the estimated useful life of the network assets and the subsequent normalisation of the depreciation charge.

Remgro values its stake in Seacom at R1bn.

The inferred value of CIVH/DFA is alone more than R7.6bn — meaning it is a fast-growing enterprise that will certainly attract widespread market interest.

Durand says though Remgro’s investment portfolio is constantly reviewed, there are no plans for a Venfin-type separate listing.

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