Renergen CEO Stefano Marani’s links to Clade Investment Management (Clade) and Kigeni Holdings, investors when the mining company was listed in 2015, are under the spotlight.
Clade was established in 2004 to offer a “comprehensive range of alternative traditional long-only and hybrid investments”.
At launch, the investment company said it targeted African and global investors with its new investment products.
It held a core portfolio expected to generate stable returns and then hedged the market movements using long and short JSE ALSI futures.
Marani, who served as a director of Clade Investment Management, told CNBC Africa in 2012 that the Clade fund comfortably outperformed the market.
“Since inception, which is about 42 months ago, we outperformed the JSE ALSI 40 by around 53% in absolute terms,” he said.
Clade’s investment strategy was simple – look at a company’s ability to generate cash flow from operations. “We believe cash is king,” Marani said.
He explained that they picked between 50 and 60 JSE shares based on liquidity and market cap and then picked the top 40 based on cash flow from operations.
Clade’s top holdings were BHP Billiton, Anglo, SAB Miller, Sasol, MTN, Standard Bank, Kumba, Firstrand, Vodacom, and Absa.
He said while cash flow did not always translate into dividends and share price growth, it translated into profitable defensive stocks.
“You are not buying the story. You are buying the truth,” Marani said.
Clade, Renergen, and Stefano Marani
Fast forward a decade, and Clade became a topic of discussion on social media as to how Marani, Clade, and Renergen are linked.
Cilandia Capital’s activist investment manager, Albie Cilliers, raised questions about the involvement of Clade and Kigeni Holdings with Renergen.
Kigeni, through Portugal Gateway, told stakeholders that it invested in Renergen and “held 20% of the company in our portfolio”.
It said in a presentation that the investment was made at an original enterprise value of €1.1 million in 2015.
It exited by passing shares to investors before listing on the JSE and the Australian Stock Exchange with an enterprise value of € 66.3 million. At the time, its portfolio had been diluted to 8.3%.
Kigeni said its return on investment on its Renergen investment was 24.9 times over the four years it held the investment.
Following Cilliers’ comments, Renerged released a SENS statement explaining that Kigeni, a company co-founded by Stefano Marani in 2009, held a minority stake in Clade.
Clade was an asset management company which invested at the time of Renergen’s initial public offering (IPO).
Marani confirmed that Clade, which he described as Kigeni’s fund management arm, bought shares in Renergen when it was listed in 2015.
However, the fund management company sold all its shares in 2017 as the fund was wound up.
Renergen said there was no direct or indirect link between Stefano Marani and Clade at the time of the investment.
Marani told Daily Investor that he resigned from Clade Investment Management and Kigeni in 2014.
As far as he is aware, the fund was wound up, and the investment was returned to investors several years ago.
Publicly listed information shows that Clade was “deregistered due to annual return non-compliance” in 2015.
Clade’s investment in Renergen
What is striking is that, according to Marani’s 2012 explanation, Clade focussed on large, established companies with strong cash flows. They would not touch stocks based on a ‘story’.
Renergen is a pure ‘story stock’ and has never generated cash flows. It is, therefore, unclear why Clade would even consider this new IPO stock.
Marani explained that in the context of the interview – passive index funds weighted on EBITDA as opposed to market capitalisation – history shows an outperformance of the former.
“There is considerable research to show that cash flow weighted indices often outperform market capitalisation indices,” he said.
Commenting on Clade’s investment in Renergen, Marani said the interview isn’t relevant to single stock picking.
He said investors who invest in single stocks need to do their own research on publicly available information to determine a company’s prospects.
“They need to make an informed decision, and current and future cash flow generation is an important consideration,” he said.
Renergen and cash flows
Marani said cash is always important for assessing an investment and managing any business. However, it is also essential to recognise the different development stages of a business.
“Renergen is evolving from a green field exploration project into its first phase of production operation and will soon start its phase 2 expansion project,” he said.
This means upfront capital needs are large but typical of any resources, mining, or manufacturing company.
“Over time, this upfront capital requirement reduces as businesses develop into cashflow generative and subsequently dividend paying operations,” he said.
“We are working towards achieving the dividend-paying objective and will reach this milestone after capital requirement considerations allow for it in due course.”
“At this stage, we are fully committed to our expansion plans, which are indeed supported by our valued stakeholders.”