Allan Gray and PSG take more than a spoonful of Tongaat
Despite (or maybe because of) the cratering share price, big asset managers have piled in to the sugar producer
The absence of any bad news, rather than the presence of some good news, saw Tongaat Hulett’s share price jump 5% to R16.80 on Thursday. It’s still below levels last seen 26 years ago so shareholders might think it’s too early to relax, let alone celebrate.
The collapse of what was once a star attraction of the food sector has caught all but a handful of investment players off guard. How embarrassing it must be for the Investment Analysts’ Society that Tongaat scooped top prize in its latest awards for communication. The prize was picked up by former CEO Peter Staude a few months before he was nudged into “early” retirement after 16 years.
In the context of the overwhelming support from analysts, it’s reasonable that some key institutions piled into the share in recent months.
PSG Asset Management topped up its holding to 10.68% a few weeks ago, from 5.95% as at the end-March 2018 balance sheet. Perhaps the PSG team thought there might be synergies with its own stable of food businesses, or that the property assets would more than make up for the decline of the sugar business.
A more recent addition to the Tongaat share register is Allan Gray, whose Balanced Fund splurged R67.3m on Tongaat shares in recent months, taking it from a nil holding to 3.11%. At this level, Allan Gray is Tongaat’s sixth largest shareholder, still far behind the Government Employees Pension Fund, which at 15.5% is the single largest investor.
It is unclear at this stage whether or not the PwC investigation will be extended beyond a review of “certain practices”, but the dramatic collapse in Tongaat’s profit performance suggests the problems extend beyond a few accounting policies.
No doubt the spurned members of the pension fund, who lost a protracted court battle in pursuit of R360m clawed back by the company, will be watching developments closely.