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Very little fire in Brimstone but it’s not all ash it seems



Very little fire in Brimstone but it’s not all ash it seems

Investment company hurt by lower share prices among its associates and joint venture holdings

Marc Hasenfuss

Interim results issued this week by Brimstone Investment Corporation hardly shook up the market. The income statement reflected decent hikes in sales and dividends, while the share of income flows from associates and joint ventures came in markedly higher at R77m.
But the hefty fair value losses of R404m – stemming mainly from the weaker share prices in private education group Stadio, private hospitals group  Life Healthcare, and property group Equites – nobbled bottom line and the all important intrinsic net asset value (NAV).NAV at the end of June sat at R16.54/share – meaning Brimstone’s more tradeable N-shares are offering a gaping discount of 40%. At this point, the combined values of Brimstone’s stakes in fishing groups Sea Harvest and Oceana are worth more then the group’s market capitalisation.
Possibly the market is not that enamoured with Brimstone’s debt of more than R3bn. Although this is well covered by assets, interest paid on the borrowings did shave almost R160m off the profit line.
Brimstone does not appear perturbed about the level of borrowings. But would there be any appetite to sell off the remaining 3.4% stake in Life Healthcare when market conditions improve? That would raise roughly R1bn on a net basis, lopping off a significant slice of borrowings.
Questions have also been asked about the possibility of Brimstone selling its short-term insurer Lion of Africa.
It’s worth noting Lion clawed back its losses to just R7.7m from a R38m loss previously after ongoing remedial action.
Brimstone also reported an improved claims ratio 64% (2017:71%) with gross written premiums increasing by 55%. Without including tax issues, Brimstone carries Lion at a modest valuation of R80m. If Lion could roar back to profitability in the second half then interested parties might begin stalking.

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