Our opinion on the current state of REINET(RNI)Reinet (RNI) is an investment holding company whose primary asset was a 2.12% holding in British American Tobacco (BAT), valued at approximately $1.8 billion, which accounted for 31% of its net asset value (NAV). This figure has decreased significantly from 85% ten years ago, largely due to a decline in BAT's share price. This decline reflects increasing legal challenges for the tobacco industry, particularly in the US, where the FDA is considering changes to menthol cigarette regulations.
Despite this, Reinet showed little urgency to divest from BAT as it continued to receive strong dividends from growth in developing markets, even as cigarette sales declined in developed countries. As BAT's value decreased, other assets in Reinet's portfolio became more prominent. The largest of these is its 46% stake in Pension Insurance Corporation (Penscorp), which now represents 36.8% of its portfolio. Additionally, the company owns a variety of private equity investments accounting for approximately 15% of its portfolio. Since March 2009, Reinet has achieved a compound growth rate of 8.8% per annum.
In its results for the six months to 30th September 2024, Reinet reported a NAV of 3625 euro cents per share, up from 3089 euro cents a year earlier. The company emphasized that it has no direct exposure to Russia, Ukraine, or the Middle East through its underlying investments or banking relationships and has not faced significant direct impacts from interest rate fluctuations or inflation.
The share is considered a rand-hedge investment. While it fell from a high of R343 in February 2020 to lows in January 2021, we recommended waiting for a break above its long-term downward trendline. That break occurred on 16th September 2019 at R270 per share, and the share is now trading at R480.31. It faced a setback after BAT announced a GBP25 million write-down of its US operations, which caused a 10% fall in BAT's share price.
On 13th January 2025, Reinet announced the sale of its entire BAT holding, which accounted for 24% of its total portfolio, for GBP 1.221 billion. This marked a significant shift in the company's asset composition. Subsequently, on 22nd January 2025, Reinet announced that its NAV as of 31st December 2024 was 40.46 euros based on 171.3 million shares in issue. However, in a quarterly report on 24th January 2025, the company adjusted its NAV figure to 38.12 euros as of the same date.
This share benefits from any weakness in the rand, and investors should carefully consider the currency's future prospects before making decisions. With the sale of its BAT holding, Reinet’s portfolio diversification and growth strategy will be a key area for investors to monitor going forward.
