MARC HASENFUSS: Misdirections, flaws and deep discounts

It’s been a most difficult week, I have to admit. Dealing first with the passing of David Thomas, the larger-than-life frontman for “avante garage” band Pere Ubu. Thomas, for those who don’t know, wrote the second-best opening verse in the history of rock music in the band’s non-hit Final Solution: “The girls won’t touch me ’cause I got a misdirection, And living at night isn’t helping my complexion, The signs all say it’s a social infection, A little bit of fun’s never been an insurrection.” That song got me through many a grey day in a small industrial town in the early 1980s. May the big man rest in peace.

Second, my daughter Sarah, who recently kicked off her BCom studies, finally opened her EasyEquities account — and tasked me to help with her asset allocation. Unlike my son, who had his own firm ideas on where to mobilise his savings (and, to his credit, has remained steadfast throughout the Trumpian market ructions), my daughter made the foolish assumption of “Dad, you know better”. This is a tough market to invest in, so under duress and stress I probably erred on the side of caution with a tax-free savings portion comprising Reitway Global Property Income exchange traded fund (60%) and the rest spread equally between Sygnia Itrix MSCI Japan Index ETF, Satrix Resi and Sygnia 4th Industrial Revolution Global Equity Fund.

In the non-tax-free portion, I opted for investment companies — predictably — with a small-cap growth share or two chucked in for good measure. By the time Sarah reaches the parts of her course involving asset management, I hopefully won’t have too many uncomfortable questions to answer. My wife, who these days makes a point of reading the FM cover to cover, has already made a number of pointed inquiries that set me on edge. But stuff that, I’m not urging a 20-year-old to invest in gold or ArcelorMittal.

Speaking of contentious strategies in capital appreciation efforts, small investment company Astoria has taken quite a ding in its portfolio value for the first quarter of its 2025 financial year, thanks mainly to ongoing flaws in the global diamond sector. This week Astoria, whose main value thankfully lies in its retail hub Outdoor Investment Holdings, reported an 8.69% decline in intrinsic NAV, from R11.70 a share at the end of December 2024 to R10.68 a share at the end of March. That might not seem like a complete train smash, but over a year there has been an NAV decline of 23% from the R13.85 a share reported at the end of March 2025.

Losing nearly a quarter of the stated NAV in just 12 months is pretty startling. The pain stems mainly from Astoria’s 25% interest in diamond ventures Trans Hex Group as well as Trans Hex Marine Group and TIS Management Holdings. Astoria noted that diamond prices continue to experience downward pressure, most notably on the stone sizes Trans Hex Marine mines. But here’s the shocker: “As a result of the reduced diamond prices, together with the debt funding within the marine business, Astoria estimates the current equity value of Trans Hex Marine and TIS to be NIL (their emphasis)”.

It’s worth noting that at the end of 2023, Astoria still had a R144m value on its stake in the marine diamond business. Due to uncertainty in the diamond market, Astoria advised worryingly that determining Trans Hex’s fair value “is difficult at this stage”. Taking into consideration guarantees provided to the marine operations, Astoria opted to write down its share of Trans Hex’s value by a whopping 55% to just $1.26m, or about R23m. At the end of 2024 the Trans Hex stake was still valued at R53m, and as recently as the end of 2022 it was recorded as R83m.

Anglo American shareholders — wary of how the mining giant will be dealing with its interest in De Beers Group — might review Astoria’s latest quarterly statement with some trepidation. In any event, I see the bid/offer spread on Astoria’s shares is now 500c-680c. The offer represents a 36% discount on the latest NAV, and the bid a 53% discount. That spread might reflect differing views on how much diamonds could tarnish Astoria’s prospects this year. Astoria darkly observes that uncertainty surrounding the potential impact of US tariffs on diamonds imported into the US has led to a further slowdown in diamond trade globally since the end of March.

Staying with investment counters, the latest R146bn valuation stated for Reinet Investments, the Rupert family’s offshore vehicle, means the shares listed on the JSE are offering a discount of about 36%. That’s a pretty wide cut, despite Reinet wallowing in cash after the recent sale of its remaining stake in British American Tobacco (BAT). The BAT proceeds amounted to a not insubstantial £1.22bn — though some might quibble that Reinet bailed at £28.20 a share, when the share price has blazed up to £31.54 at the time of writing.

Overall, it seems the market is not expecting any form of significant special dividend or, for that matter, that Reinet will be mobilising the BAT windfall in any inspired manner in terms of new investments. Personally, I’ll be more than happy to keep accumulating at these levels.