When the underdog finally has its moment, there is going to be a racket … not to mention bouts of outrageous baying as the jungle juice flows. We had both after the tennis league matches on Saturday when I was part of a historic win against the Fresnaye first doubles team — an achievement that‘s proved as elusive as a ten-bagger or a sincere compliment on my sartorial elegance.
It would have been an unprecedented clean sweep had my partner, Loop-en-Val, and I not unceremoniously choked at five all in the first set and again when we had four set points in the second-set tie-break. We broke the cardinal rule of giving Fresnaye’s indomitable and unflappable Meyer and Ari the slightest sniff of hope …
Frustrations inevitably boiled over, and I might have sworn in a manner that betrayed my upbringing in a rough industrial town. That said, our opponents, as always, were most gracious — to the point that I’d say a few key line calls were disarmingly generous. There wasn’t even any carping when the promised round of finest Italian grappa turned out to be the dregs of a three-year-old brandy tucked away for medicinal purposes before the Covid outbreak.
Fish Hoek now sits in an unaccustomed position near the top of the log, with just three fixtures left to play.
When it comes to fairytales, which local investor won’t warm to rumours that luxury brands house Richemont might be part of a consortium bidding for diamond group De Beers? What once belonged to the Oppenheimer dynasty might, if reports are accurate, soon sit partly with the Rupert family — the controlling shareholder at Richemont.
Sentiment for diamonds might be horribly flawed at this point, thanks to the previously measured supply being ruptured by increasing production of synthetic stones. Natural diamonds, who knows, might still come back into fashion and command premium prices among the affluent shoppers of the world.
Perhaps that’s exactly what Richemont is banking on, along with, I assume, an attractive buy-in point at De Beers. But there would be practical advantages for Richemont to have a degree of influence at De Beers. Its famous brands — Cartier, Van Cleef & Arpels and Buccellati — would have access to the best-known source of natural diamonds in the world.
Then there is the brand-building opportunity. The Rupert family has enjoyed notable success in this regard over the decades and on a global scale. I saw that one industry publication, the authoritative Something About Rocks, floated the idea of “opening a red box and finding a little passport tucked inside, telling you which mine your diamond came from”. The magazine argued that in “a market full of lab-grown stones, that’s a pretty good answer to the question of what makes yours special”.
Richemont certainly has the capacity on its balance sheet to participate in a collective tilting at De Beers without unduly alarming shareholders. At last count, it held €9.1bn in cash. I imagine that would be enough to buy a controlling stake in De Beers several times over at current values.
It’s not the first time Richemont has been linked to a De Beers deal. That’s understandable, because the Ruperts have a penchant for precious stones. Richemont’s corporate cousins, Remgro and Reinet, have both held small diamond interests. Remgro was a longtime shareholder in Trans Hex and probably chose the right time to unbundle that holding more than 15 years ago. More recently, Reinet briefly held interests in projects that extracted diamonds from water tailings.
Neither Remgro nor Reinet would claim glittering returns from their diamond mining interests. But it’s quite possible Richemont might have a longer and more rewarding engagement.
Small-cap success
Speaking of engagements, I thought iOCO hosted an informative and intriguing investors’ presentation last week. My colleague Raymond Steyn has tackled the story with some vigour.
I am a small shareholder in iOCO. It’s one of the more compelling JSE small-cap stories, along with Santova, KAP and Blu Label. I can’t help but draw a parallel with Argent Industrial, where iOCO CEO and major shareholder Rhys Summerton played a key behind-the-scenes role in unlocking value and setting a sound long-term growth platform. iOCO’s stated strategy of buying back its undervalued shares and making selective (and manageable) acquisitions in viable niches comes straight out of the Argent playbook.
There is also the emphasis on free cash flow, which gives powerful optionality for share buybacks and acquisitions. The difference between Argent and iOCO is that the former’s strategic narrative was (maybe still is) not as openly articulated. iOCO gives cash flow forecasts, offers insights on the types and size of potential acquisitions and clearly details strategic imperatives.
The market, at this juncture, remains wary. That’s understandable. It was never going to be easy to erase the legacy of the old EOH technology cluster (add expletive). Some readers, though, may have noticed that Summerton is a prime mover at another recent (secondary) listing on the JSE in the form of Toronto-based investment counter Aimia. Aimia is cash flush and primed to make new investments.
Would iOCO, at current levels, not represent a low-risk opportunity on an undervalued counter that looks capable of long-term organic and acquisitive growth?
