BRIMSTONE INV CORP LTD-N Trade Ideas — JSE:BRN

Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of holdings. It owns: 1. 54,2% of Sea Harvest, which is a listed fishing company and has a market capitalisation of just over R4,5bn. 2. 100% of Lion of Africa, a loss-making insurance company, which decided in November 2018 to cease operations and close its doors. 3. 100% of House of Monatic, a loss-making clothing manufacturer. 4. 24% of Oceana, the largest fishing company in South Africa, with a market capitalisation of R8,6bn. Brimstone is increasing its shareholding by buying 8m shares from Tiger Brands, which will take its holding to 22,9%. 5. 6,1% of Grindrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49,8% of Vuna Fishing company. 9. 12,8% of Milpark Education. 10. 25% of Obsidian (a black-owned investment holding firm positioned to benefit from the roll-out of the NHI), which, in January 2020, it increased to 80% for R35,7m. Additionally, it holds a variety of other smaller shareholdings in property, healthcare, 3,9% of Long4Life, and 5,3% of Stadio. The company has been selling down its stakes in Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi. It has used the proceeds to pay down R1bn of its debt. The company disposed of its entire stake in Milpark and part-stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. In its results for the year to 31st December 2024, the company reported revenue down 66% due to the deconsolidation of Sea Harvest and headline earnings per share (HEPS) up 51%. The company undertook a share buy-back of 4,5m shares for R21,7m and, in the current financial year, has bought a further 861 325 shares for R4,3m. We regard the share as too thinly traded for private investors; however, they have been unbundling and releasing value, so volumes are improving.

Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of holdings. It owns: 1. 54.2% of Sea Harvest, which is a listed fishing company and has a market capitalisation of just over R4.5bn. 2. 100% of Lion of Africa, a loss-making insurance company, which decided in November 2018 to cease operations and close its doors. 3. 100% of House of Monatic, a loss-making clothing manufacturer. 4. 24% of Oceana, the largest fishing company in South Africa with a market capitalisation of R8.6bn. Brimstone is increasing its shareholding by buying 8m shares from Tiger Brands, which will take its holding to 22.9%. 5. 6.1% of Grindrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49.8% of Vuna Fishing company. 9. 12.8% of Milpark Education. 10. 25% of Obsidian (a black-owned investment holding firm positioned to benefit from the roll-out of the NHI), which in January 2020, it increased to 80% for R35.7m. Additionally, Brimstone holds a variety of other smaller shareholdings in property, healthcare, 3.9% of Long4Life, and 5.3% of Stadio. The company has been selling down its stakes in Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi. It has used the proceeds to pay down R1bn of its debt. In its results for the six months to 30th June 2024, the company reported revenue down 39% and headline earnings per share (HEPS) up 110%. The company's intrinsic net asset value (NAV) fell 5.7% to 1143.6c per share. The company said, "Despite the operating environment, the Group reported headline earnings per share of 71.9 cents (2023: 34.2 cents), up 110% over the comparative period. This was mainly due to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period, and the increase in Brimstone’s share of profits of associate, Oceana, from R94.9 million in the prior period to R187 million in the period under review." The company disposed of its entire stake in Milpark and part-stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. In a trading statement for the year to 31st December 2024, the company estimated that HEPS would be between 46% and 56% higher. We regard the share as too thinly traded for private investors and, unless they begin to unbundle the portfolio, the extra value is likely to remain locked in.

Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of holdings. It owns: 1. 54,2% of Sea Harvest, which is a listed fishing company and has a market capitalisation of just over R4,5bn. 2. 100% of Lion of Africa, a loss-making insurance company, which decided in November 2018 to cease operations and close its doors. 3. 100% of House of Monatic, a loss-making clothing manufacturer. 4. 24% of Oceana, the largest fishing company in South Africa with a market capitalisation of R8,6bn. Brimstone is increasing its shareholding by buying 8m shares from Tiger Brands, which will take its holding to 22,9%. 5. 6,1% of Grinrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49,8% of Vuna Fishing company. 9. 12,8% of Milpark Education. 10. 25% of Obsidian (a black-owned investment holding firm positioned to benefit from the roll-out of the NHI) which, in January 2020, it increased to 80% for R35,7m. It also holds a variety of other smaller shareholdings in property, healthcare, 3,9% of Long4Life and 5,3% of Stadio. The company has been selling down its stakes in Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi. It has used the proceeds to pay down R1bn of its debt. In its results for the six months to 30th June 2024 the company reported revenue down 39% and headline earnings per share (HEPS) up 110%. The company's intrinsic net asset value (NAV) fell 5,7% to 1143,6c per share. The company said, "Despite the operating environment, the Group reported headline earnings per share of 71.9 cents (2023: 34.2 cents), up 110% over the comparative period. This was mainly due to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period, and the increase in Brimstone’s share of profits of associate, Oceana, from R94.9 million in the prior period to R187 million in the period under review." The company disposed of its entire stake in Milpark, and part-stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. Both ordinary and "N" shares are thinly traded, but the ordinary shares are worse. We regard the ordinary share as too thinly traded for private investors and, unless they begin to unbundle the portfolio, the extra value is likely to remain locked in. On 27th November 2024 the company announced that its intrinsic net asset value (NAV) had declined by 9,6% in the 3 months to 30th September 2024.

Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of investments across various sectors. Its significant holdings include: 1. 54.2% of Sea Harvest: A listed fishing company with a market capitalization of just over R4.5 billion. 2. 100% of Lion of Africa: A loss-making insurance company that decided to cease operations in November 2018. 3. 100% of House of Monatic: A loss-making clothing manufacturer. 4. 24% of Oceana: The largest fishing company in South Africa, with a market capitalization of R8.6 billion. Brimstone is increasing its shareholding by acquiring 8 million shares from Tiger Brands, which will take its holding to 22.9%. 5. 6.1% of Grindrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49.8% of Vuna Fishing Company. 9. 12.8% of Milpark Education (although it has disposed of its entire stake recently). 10. 25% of Obsidian: A black-owned investment holding firm positioned to benefit from the roll-out of the NHI, which Brimstone increased to 80% for R35.7 million in January 2020. 11. Various smaller shareholdings in property, healthcare, 3.9% of Long4Life, and 5.3% of Stadio. Brimstone has been actively selling down its stakes in several companies, including Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi, using the proceeds to pay down R1 billion of its debt. In its results for the six months to 30th June 2024, Brimstone reported a 39% decline in revenue, but a 110% increase in headline earnings per share (HEPS). The company's intrinsic net asset value (NAV) fell by 5.7% to 1143.6 cents per share. The company attributed the increase in HEPS primarily to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period and an increase in Brimstone’s share of profits from Oceana, rising from R94.9 million in the prior period to R187 million in the period under review. Brimstone also disposed of its entire stake in Milpark and partial stakes in Phuthuma Nathi, MTN Zakhele Futhi, and Equites. Both the ordinary and "N" shares are thinly traded, with the ordinary shares being more illiquid, making them less suitable for private investors. Unless Brimstone begins to unbundle its portfolio, the additional value within the company is likely to remain locked in, limiting the potential upside for investors.

Our opinion on the current state of BRIMSTON(BRT)Brimstone (BRT) is a black-controlled investment holding company with a diverse portfolio of holdings. It owns: 1. 54.2% of Sea Harvest, which is a listed fishing company and has a market capitalization of just over R4.5bn. 2. 100% of Lion of Africa, a loss-making insurance company, which decided in November 2018 to cease operations and close its doors. 3. 100% of House of Monatic, a loss-making clothing manufacturer. 4. 24% of Oceana, the largest fishing company in South Africa with a market capitalization of R8.6bn. Brimstone is increasing its shareholding by buying 8m shares from Tiger Brands, which will take its holding to 22.9%. 5. 6.1% of Grindrod. 6. 18% of Aon Re Africa. 7. 25% of South African Enterprise Development. 8. 49.8% of Vuna Fishing Company. 9. 12.8% of Milpark Education. 10. 25% of Obsidian (a black-owned investment holding firm positioned to benefit from the rollout of the NHI), which it increased to 80% for R35.7m in January 2020. Brimstone also holds a variety of other smaller shareholdings in property, healthcare, 3.9% of Long4Life, and 5.3% of Stadio. The company has been selling down its stakes in Life Healthcare, Lion of Africa, House of Monatic, Equites, Multichoice, and Phuthuma Nathi. It has used the proceeds to pay down R1bn of its debt. In its results for the year to 31st December 2023, the company reported revenue up 5.1% and headline earnings per share (HEPS) up 4%. The company said, "The year under review was characterised by high inflation, a weaker Rand and high interest rates. Continued load shedding and pressure in the domestic transport network, in particular the ports, have weighed heavily on the economy. The high unemployment rate continued to impact consumer spending in an environment where the consumer was already under pressure." Both ordinary and "N" shares are thinly traded, but the ordinary shares are worse. We regard the ordinary share as too thinly traded for private investors and, unless they begin to unbundle the portfolio, the extra value is likely to remain locked in. On 24th May 2024, the company reported that its intrinsic net asset value (NAV) had fallen 6.7% by the end of March 2024 to 1132c per share.

Our opinion on the current state of BRT Brimstone Investment Corporation Ltd. stands as a significant black-controlled investment holding company in South Africa, with a diversified portfolio spanning various sectors. Its strategic investments in key industries, including fishing, insurance, clothing manufacturing, education, and healthcare, reflect a broad approach to capturing value across the South African economy. Notably, Brimstone's majority stake in Sea Harvest and significant holdings in Oceana underscore its strong position in the fishing industry, an essential sector in South Africa's economy. However, Brimstone's journey has not been without challenges. The decision to cease operations of Lion of Africa Insurance due to unprofitability and the downsizing in House of Monatic highlight the difficulties faced in some ventures. Despite these setbacks, Brimstone has demonstrated resilience and adaptability, notably through strategic disinvestments in non-core or underperforming assets, allowing for significant debt reduction. Brimstone's financial performance for the six months ending on 30th June 2023, showcasing a 17% increase in revenue and a notable 239% surge in headline earnings per share (HEPS), indicates a robust operational recovery and financial health. This performance is further reflected in the company's intrinsic net asset value (INAV), although it experienced a slight decrease from the previous year. The trading at a substantial discount to INAV highlights a potential undervaluation by the market, presenting an opportunity for investors. Looking forward to the year ending 31st December 2023, Brimstone's projection of an increase in HEPS by 1% to 7% signals continued positive momentum. However, the limited liquidity of its shares, particularly the ordinary shares, poses a challenge for private investors seeking entry or exit points. This liquidity issue, coupled with the current discount to INAV, suggests that unlocking value for shareholders may require further strategic actions, potentially including portfolio unbundling or other measures to enhance shareholder returns. In summary, Brimstone Investment Corporation embodies the complex dynamics of investment holding companies in emerging markets, balancing strategic growth opportunities against operational challenges and market perceptions. While its diversified portfolio offers exposure to key sectors of the South African economy, investors must navigate the nuances of liquidity and market valuation. As Brimstone continues to refine its investment strategy and operational focus, the potential for value realization remains, contingent on strategic execution and market conditions.

BRIMSTONE INV CORP LTD-N

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