Avior Capital Markets - PSG Group Limited (104T) PSG Group | Crowding out the potential growth

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Avior Capital Markets

David Talpert

PSG Group | Crowding out the potential growth

PSG Group reported a 9% increase in FY â€˜19 recurring earnings per share and a 22% increase in its SOTP value per share. PSG is trading at a 16% discount to its NAV. Capitec's share price appreciation has resulted in Capitec accounting for 66% of PSG NAV (78% of PSG's market cap). PSG has not announced any material new transaction or initiative that will reduce the discount to NAV. With Capitec trading at an elevated valuation, we believe PSG is expensive. We see no catalyst for a narrowing of the discount.

30/04/2019 15 EN

Underlying

PSG Group Limited

PSG Group is an investment holding company. Through its subsidiaries and associated companies, Co. is engaged in the provision of financial services as well as financial advice and fund management services, financing, banking, private equity and corporate finance services. Co. operates six reportable segments: Capitec, Zeder, Paladin, PSG Konsult, PSG Fund Management and PSG Corporate. Co. operates predominantly in South Africa.

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ZAE000013017 South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

David Talpert

Other Reports on these Companies

Avior Capital Markets

PSG Group | More than a Capitec proxy?

PSG Group has experienced increased concentration risk in its portfolio as Capitec comprises 69% of Group NAV. The discount to NAV has widened to c.23%. We remain positive on Konsult and Curro. However, we are disappointed in returns from Zeder and PSG Alpha. We believe Capitec is expensive despite its growth prospects. In our view, PSG's track record supports a narrower discount (15%). However, we believe Capitec will continue to drive the valuation. Based on our UNDERPERFORM rating on Capitec, we believe PSG is fairly valued at current levels.

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PSG Group | Opportunity in the discount

PSG Group's discount to NAV has widened to 24%. In our view, PSG has an impressive record of allocating capital. Management has not made poor investments that justify a wider discount. We are concerned about Capitec's elevated rating and its 67% weighting in PSG's SOTP. However, we believe the current discount to NAV offers a sufficient margin of safety. Our short-term investment thesis is based on a narrowing of the discount. Longer-term, we believe PSG can outperform due to growth in the underlying businesses.

September 6, 2019 September 6, 2019 11 EN

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PSG Group | Crowding out the potential growth

PSG Group | More than a Capitec proxy?

PSG Group | Opportunity in the discount

1 director bought

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

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