Investment group Remgro reports its final results in a fortnight, and I will be fascinated to see just how the cash pile flow is shaping up. At the end of December it topped R12bn, but then the sale of a large tranche of FirstRand shares had not been factored in.
While even flusher corporate cousin Reinet disappointed shareholders with its dividend declaration, I expect Remgro to be a tad more generous. I am also keenly awaiting the update from the new-look fibreoptic unit Maziv, particularly its progress in grabbing land in the largely untapped and sprawling lower-LSM markets.
Another issue will be whether Remgro still lumps its 7.6% stake in hybrid financial services innovator Discovery as a portfolio investment. Discovery, as my colleague Antoinette Steyn writes in this edition, is really hitting its straps. In April this year, writing on Remgro’s interim results, I noted Discovery shares were up 25% over a year and more than 75% over three years. I suggested that it would not be the worst time for Remgro to offload its shares in Discovery.
At the time Remgro chief investment officer Carel Vosloo intimated that the group relished maintaining a partnership relationship with Discovery. He felt Discovery still had some runway to go. And, boy, was he right! Remgro’s stake in Discovery was valued at just under R10bn at the end of December 2025 but has since increased to R13.2bn. With Discovery looking to keep up its stride over the medium term, I doubt Remgro — if it had the inclination to sell out — would struggle to place its holding in Discovery.
Remgro, as I pointed out previously, has stepped away from investments where it can no longer play an active or influential role as a shareholder. Discovery, I think, will be different. But I do wonder why the group never considered upping its stake in Discovery at markedly lower prices. It’s probably a bit late in the day to start thinking about increasing its holding, but the existing significant minority stake in Discovery is now quite large in Remgro’s life, well ensconced as its fourth-biggest investment.
Moving to the old economy, the handful of survivors from the listings boom of 1987 continue in their resilient ways. Packaging group Transpaco dug deep to eke out a 7% gain in bottom line off a sliver of revenue in the year to end-June. Of course, you’d expect nothing less from Transpaco, a no-frills and formidably functional operator. The company is also not known for waffling commentary on its results, but the numbers illustrate just how tough it is in the packaging sector at the moment. The plastics division had a slight uptick in revenue to R1.26bn but commendably managed to rebuild the operating margin to 9.65% and bring operating profits up to R122m (previously R94m). In the paper and boards segment revenue was slightly down to R1.39bn, but the margin was crumpled to 6.1% (from 6.4% in 2025) for an operating profit drop from R75m to R70m.
Directors were still confident enough to declare a 180c a share final dividend (up 12.5% from last year’s final payout of 160c a share) for a full-year payout of 250c a share, which was covered a generous 2.2 times by headline earnings. It would be easy to dismiss Transpaco as a mature, ex-growth counter. The market certainly thinks so, slapping a 7.6 earnings multiple and a 5.95% yield on the share. Interestingly, though, Transpaco has been one of the best-performing small-cap shares on the JSE over the short term, notching up gains of over 20% year to date and more than 40% over a year.
By comparison, small plastics packaging specialist Bowler Metcalf has been flat year to date and up only 8% over a year. While investors can bank on dependable profit performances from a lean and mean Transpaco, what might flavour sentiment is ongoing efforts at “identifying and pursuing appropriate acquisitions”. Late last year the group had targeted Premier Plastics in a R128m deal but abandoned the transaction when the Competition Commission prohibited the acquisition.
Presumably Transpaco prefers to pursue smaller, easy-to-digest deals that bulk up its core businesses. But what about a more ambitious merger? I can’t help thinking that Transpaco and Bowler should be talking. There are several similarities. Both groups were part of the class of 1987 listings (of which a pitiful few still remain listed today, the others being Grindrod, Combined Motor Holdings and Spur), so they have done the hard yards through several cycles. Both have similar corporate cultures with spartan operating regimes characterised by an unrelenting focus on production efficiencies and cost containment as well as strong and enduring customer relationships.
The groups are of similar “value”, with Transpaco worth R1.3bn and Bowler R1bn. Both sit on decent cash piles. Transpaco trades on a 7.6 trailing earnings multiple and a 5.95% yield, while Bowler trades on a 7.2 multiple and a 5.24% yield. The difference is in the revenue line and profits. Bowler is considerably smaller, with a turnover of just under R1bn vs Transpaco’s R2.4bn. But Bowler’s operating margin — last seen at 17.4% — is markedly higher than the margin achieved by Transpaco’s plastic packaging segment (mainly refuse and shopping bags). A combined operation would command several viable packaging niches and have bigger balance sheet muscle to snap up complementary businesses. Just a thought …
