South African billionaire Patrice Motsepe’s ARC Investments increases portfolio value

African Rainbow Capital Investments (ARC Investments), backed by Patrice Motsepe, reported a significant rise in its underlying portfolio value. The Johannesburg Stock Exchange (JSE)-listed investment holding company, which primarily consists of the ARC Fund, said its intrinsic net asset value increased nearly 16 percent to R15.3 billion ($803 million) for the period ending June 2023. On a per-share basis, its intrinsic net asset value climbed slightly more than 13 percent to R11.41 ($0.60).

The company’s portfolio comprises shares in TymeBank, its international branch TymeGlobal, mobile communication company Rain, and Sanlam’s third-party asset management, which acquired Absa’s investment management business in December 2022. Last year, the group sold its remaining stake in Afrimat for R486 million ($25.5 million) and stakes in Payprop and Humanstate from its Gemcap unit, adding R486m ($25.5 million) to the ARC Fund. The group also sold Rand Mutual Holdings for R727 million ($38.1 million) while investing R664 million ($34.85 million) in TymeBank and TymeGlobal. Additionally, ARC Investments injected R833 million ($43.7 million) into phosphate miner Kropz Plc. The group’s cash reserves saw a 25-percent decline to R500 million ($26.2 million) as of end-June, with total debt surging 51 percent to about R1.47 billion ($77.2 million).

In a statement released Thursday, ARC Investments commented on the challenging economic conditions, noting, “A tough macro environment put pressure on the economy and consumers and harmed some of our entities’ growth.” However, the company said that its diverse portfolio showed remarkable resilience.

The group has been strategically selling off smaller and non-essential assets and minimizing its exposure to directly purchasable listed shares. Instead, it is increasing its financial services and fintech holdings through acquisitions and other business deals. ARC Investments aims to limit exposure to sectors like mining and expand into “future-focused growth areas” like financial services and fintech.

However, shareholders express concern as ARC Investments’ market price is significantly below its book value — a common challenge for many investment holding companies. Despite efforts, the group’s share price of around R6.02 ($0.32) is nearly 47 percent less than its reported intrinsic net asset value per share of R11.41 ($0.60) as of end-June.

Co-CEO Johan van Zyl previously stated the group’s intention to reduce the price difference between its market price and book value to between 10 and 20 percent. ARC Investments has launched initiatives to address this discount, including focusing on its top 13 investments, making up approximately 88 percent of its portfolio.

Furthermore, the group cut the management fee for its portfolio to R98 million ($5.14 million) for the year ending in June, down from R225 million ($11.8 million). ARC Investments, valued at over R8 billion ($420 million) on the JSE, saw little change in its closing share price on Thursday and has declined nearly two-percent year-to-date.

Patrice Motsepe, South Africa’s richest black person, owns a 27-percent stake in African Rainbow Capital Investments.