Johann Rupert has a R38 billion problem

Remgro, founded and chaired by billionaire Johann Rupert, has experienced a rapidly widening discount to intrinsic net asset value (INAV) over the years.

The intrinsic net asset value of a holding company is the estimated fundamental worth of all its underlying investments.

A discount to INAV occurs when the company’s share price is lower than the actual per-share value of its underlying assets.

There are many reasons for such a discount, including pessimistic market sentiment, a lack of trust in the management team, and the company’s poor performance.

A persistent discount often signals low investor confidence in the company and its management team. Investors simply don’t trust that the company will create value.

Remgro is a good example of a widening discount. Its share price has traded at an increasingly large discount to the underlying value of its assets.

In 2014, the discount to INAV was 6.5%. By 2020, it had widened significantly to 35.3%, and it reached a concerning 45.8% in 2024 and 45.9% by 2025.

Based on Remgro’s market cap of R83.7 billion on 30 June 2025, the discount calculated at that time amounted to R38 billion.

This R38 billion discount is a headache for the board and management. It signals a lack of confidence in the company.

Another reason is that Remgro has seen a big shift towards unlisted assets between 2014 and 2025.

Historically, Remgro’s portfolio was heavily weighted toward listed investments, with unlisted assets making up about 22% of the portfolio in 2014.

Following major corporate transactions, unlisted investments surged to 72% in 2023 and stood at 60% in 2025.

This change reduced the Remgro portfolio’s overall liquidity and increased the subjectivity of its valuations.

With unlisted entities, it is tempting for a holding company to use Discounted Cash Flow (DCF) analysis with optimistic inputs.

DCF is extremely sensitive to long-term assumptions, which means optimistic inputs create highly inflated valuations.

Because a holding company derives revenue from fees based on valuations, it serves its purpose to have inflated values.

Although this may not be the case with Remgro, the market clearly views its intrinsic net asset value as highly optimistic.

Remgro chief executive Jannie Durand explains

Remgro chief executive Jannie Durand explained that there are many reasons for the big trading discount, including its higher ratio of unlisted investments.

He identified three investments, CIVH (Vumatel/DFA), Hirslanden (Mediclinic), and Heineken South Africa, as the primary culprits for the persistent discount.

These three make up a large portion of the portfolio but contributed minimally to earnings and dividends.

“The widening discount underlines the importance of demonstrating the veracity of the valuations in a portfolio that has pivoted towards more unlisted investments,” he said.

Durand has signalled a shift toward returning more cash to shareholders to prove the value inherent in the NAV.

Remgro implemented a significant share repurchase program in 2023, buying back roughly R1 billion worth of shares.

Durand’s logic was that buying Remgro shares at a 40% discount was effectively the best investment the company could make.

He has also expressed confidence that Remgro can become a high dividend player in the future, putting money in shareholders’ pockets.

He made good on that promise. In the 2025 financial year, Remgro increased its ordinary dividend by 30.3%.

Allan Gray agreed with Durand. In October 2025, it said the prevailing pessimism from the market towards Remgro was overdone.

They explained that the quantifiable reasons for the discount, including tax and head office costs, justify a discount of less than 10%.