Rupert’s Reinet won’t kick tobacco habit despite BAT hit
CEO takes comfort from underlying financial results, strong dividends and future prospects of British American Tobacco
Reinet, the Rupert family-controlled investment vehicle, is showing no signs of kicking its long-held cigarette habit despite a precipitous fall in the share price of key investment British American Tobacco (BAT).
Commenting on interim results to end September, Reinet CEO Johann Rupert acknowledged the BAT share had recently decreased substantially as the tobacco industry was being affected by the US Food and Drug Administration’s continued regulation efforts as well as the transformation strategies of industry players looking to enhance their new-generation products (NGPs).
Since the start of 2018 BAT shares on the London Stock Exchange (LSE) have slumped from about £50 to £27.
But Rupert stressed that “Reinet continues to take comfort from the underlying financial results, strong dividends and future prospects of BAT, including the investment in Reynolds American, decreased US tax rates and increased focus on NGPs”.
Reinet holds 68.1 million BAT shares – which represents a 2.97% stake in the tobacco giant and a value of €2.74bn as at the end of September 2018 – well below the €3.2bn recorded at the end of March 2018.
The BAT holding represented about 57% of Reinet’s net asset value (NAV) as at the end of September, compared with about 62% in March. Further falls in BAT’s share price since the end of September could mean BAT now represents closer to 50% of Reinet’s total portfolio.
Reinet, though, does continue to receive generous dividend payments from BAT, collecting €37m in the interim period.
The dramatic fall in BAT’s value means that Reinet’s second-biggest investment, UK-based financial services specialist Pension Insurance Corporation (PensCorp), becomes more visible to investors.
PensCorp, valued at €1.4bn (March: €1.3bn), now represents a chunkier 29% of Reinet’s portfolio. The group’s collection of private equity investments – despite dropping slightly in value to €728m – represented 15% of the portfolio value, compared with 14.4% at the end of March.
It was a fairly quiet period in terms of new investment activity, with a €43m investment in Grab Holdings being the most notable development.
Grab Holdings is a mobile platform operating in Southeast Asia, offering food and package delivery, mobile payments and financial services in Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia.
The distribution of assets from the old Milestone Chinese investment vehicle also saw Reinet receiving direct shareholding of 47-million shares in property developer Soho China and 34-million shares in sports brands specialist Li-Ning Company.
The Soho China shares held a value of €16m and Li-Ning around €27m at the end of the interim period.