PSG GROUP INVESTMENT PHILOSOPHIES - PSG KONSULT LANGEBAAN
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PSG GROUP
INVESTMENT PHILOSOPHIES
PSG KONSULT LANGEBAAN
Piet Mouton
12 May 2014
1
PSG Group
Market Cap: R20bn
28.3% 62.9% 57.1% 42.4% 100% 49% 100%
Other
• Banking • Financial Services • Private Education • Agri Private Equity • Private Equity • BEE • Cash and equivalents
• Unsecured loans • 618 financial • Marker leader • 5 core • Incubator for next • SA specific (R340m)
• 5.4m clients planners • >27,000 learners investments big thing? • Opportunistic • Loans to investments
• Market Cap: • AUM: R112bn • Market Cap: • Market Cap: • 13 investments • Value: R2.7bn • Valuation of holding
R25.9bn • Market Cap: R7.6bn R4.4bn • Value: R1.0bn company PAT
R8.3bn
R6.7bn (30%) R5.5bn (25%) R4.5bn (20%) R1.8bn (8%) R1.0bn (5%) R1.3bn (6%) R1.4bn (6%)
PSG has influence over companies with a combined market cap of R74bn
2
PSG Group
PSG Sum-of-the-parts
Rm Feb-12 Feb-13 Feb-14
Capitec 5 978 50% 6 128 39% 5 989 30%
Curro 1 118 9% 2 607 16% 4 660 23%
PSG Konsult 1 483 12% 2 237 14% 4 004 20%
Zeder 1 067 9% 1 412 9% 1 698 8%
PSG Private Equity 728 6% 681 4% 949 5%
Thembeka Capital 570 5% 899 6% 1 243 6%
PSG Corporate 338 3% 383 2% 383 2%
Other 684 6% 1 505 10% 1 122 6%
TOTAL ASSETS 11 966 100% 15 852 100% 20 048 100%
Perpetual prefs (1 188) (1 163) (1 393)
Other (463) (845) (615)
SOTP 10 315 13 844 18 040
Shares in issue (m) 185 191 190
SOTP per share (rand) 55.92 72.67 95.01
3
PSG Group
PSG Share price vs SOTP value per share
(7 May 2014)
120.00
109.86
107.98
100.00
80.00
ZAR per share
60.00 SOTP value (R)
Share price (R)
40.00
20.00
-
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Since 28 Feb 2014, PSG’s share price has increased by 22%
4
South Africa: Land of opportunity
But with difficult times…
5
Difficult political times
WHERE GOVERNMENT FAILS
Service delivery – Eskom and municipalities
Crime – According to the 2013 SA Crime Stats Survey, South Africa’s murder rate is
about 4.5 times higher than the global average of 6.9 murders per 100 000 people.
Education – South Africa’s maths and science education has been ranked 2nd last
in the world according to a World Economic Forum report.
Wasting of public funds – E-tolls; Nkandla
Tenderpreneurs and corruption
Labour unions becoming more aggressive – strikes costing taxpayers Rbillions!
6
Difficult economic times
Are markets set for a correction?
JSE ALSI RETURN IN 2013
Dividend Yield: 2.7%
Earnings growth: (6.4%)
Rerating: 25.1%
Total Return: 21.4%
Source: Investec Asset Management
As at 2 May 2014
7
Living in the age of opportunity
“A pessimist sees the difficulty
in every opportunity; an optimist
sees the opportunity in every
difficulty.”
- Winston Churchill
8
South Africa – “alive with possibility”
THE “GOOD” IN OUR COUNTRY
Mandela and the peaceful “In the 16 years before
transition to democracy democracy, GDP Growth was
Stable economy – introduction to 1.55% p.a.; in the 16 years
the BRICS economies thereafter, it was 3.3% p.a.”
A constitution embodying true
democracy “We have grown per capita
Leading economy in Africa income by a third since
World class financial institutions – democracy, despite the 1998
SA Reserve Bank and Receiver of global crisis and the 2009
Revenue recession.”
Source: “The long view” – PJ Landman 2013
9
South Africa – “alive with possibility”
The largest number of people in the adult (16 years and
older) population is now in the “middle income” category
(LSM 5 – 6)
10PSG Global Flexible fund
It is wise to hedge oneself through diversification
Invest a portion of your clients’ assets abroad
PSG Global Flexible Fund is ideal:
1-year performance: 13% (vs. benchmark return of 8%)
Based in Malta
Easy to invest in
11PSG strategy
Investment holding company
We choose to hold onto great companies with no exit
strategy (Buffett)
We are better at building companies from early stage
investing and growing the business, rather than utilising
leverage as is the case with the more classic private equity
model
12PSG Group
Through its investments, PSG Group has built a good reputation based on
TRUST
INTEGRITY
DELIVERY OF SHAREHOLDER VALUE
CAGR of 50.4% from 1995 - 2014
“R100 000 invested in PSG Group upon establishment 18 years ago
would have grown to R169m, compared to R1.5m had one invested in
the JSE ALSI as at 28 February 2014”
MV of R100 000 PSG investment (i.e. 300 000 PSGs @ 35cps)
PSG Group – 1.32m shares at R89.02 per share = R118m
Capitec Bank – 0.278m shares at R183.75 per share = R51m
Since 28 Feb 2014, PSG’s share price has increased by 22%
13PSG Group
An investment philosophy is particularly
important in the turbulent times in
which we find ourselves
“A man without a goal is like a ship without a rudder.”
Thomas Carlyle
14.
OUR INVESTMENT PHILOSOPHIES
15PSG – Investment philosophies
Grounded on good investment principles
Investments must be simple to
understand
16PSG – Investment philosophies
Grounded on good investment principles
Investments must have
significant growth potential
17PSG – Investment philosophies
Grounded on good investment principles
Focus, focus, focus
"The shorter way to do many
things is to do only one thing at a
time” ~ Mozart
"The successful warrior is the
average man, with laser-like focus"
~ Bruce Lee
18PSG – Investment philosophies
Grounded on good investment principles
High barriers to entry important:
easier to survive
higher margins
Curro
skills to run the best schools in
the country
capital to build schools
Capitec
banking license
branch network
19PSG – Investment philosophies
Grounded on good investment principles
Great corporate governance not
negotiable
Integrity
Transparency
Good, timely information
Trust
20PSG Group PSG
PSG invests in growing and revolutionary industries
These companies present good investment
opportunities for any discerning investor
21PSG – Capitec Bank
Increasing market share in the banking sector
640 branches
5.4m clients
9 070 employees
2 918 ATMs
Attracting new markets
Urban
Young: 20-35 yrs
Higher income
More electronic
transacting
22PSG - Capitec
PSG – Capitec Bank
40% CAGR for
2003 - 2014
BIGGEST LESSON
=
FOCUS
99% CAGR for
2005 - 2014
23PSG – Capitec Bank
AWARDS
24PSG – Capitec Bank
Core advantages
Simple products, easy to understand pricing
Great management
Audited results published less than 1 month after year-end
– that speaks of a brilliantly run company!
Conservative provisioning and write-off policy
Diverse funding base
Well capitalised with a conservative CAR
25PSG Konsult
Trading &
Planning Investments Insurance
Custody
PSG Advisor PSG Asset
PSG Online Western
PSG Trust Management
All the experts under one roof
26PSG Konsult - Trusts
• Increased “stickiness” of clients • 18 offices in 2014
• Offshore trust capabilities • Drafting of wills: 1137 in 2014
• Seamless financial and fiduciary • Estate value of wills: > R23bn
planning • Corporate trustee on 785 trusts
• Next generation wealth
management
All the experts under one roof
• Critical to proper wealth
planning
27PSG Konsult – Online trading
• Stockbroker of the year
• 3 years running
• Market access
• Local
• Major international markets
• Custody and safekeeping
All the experts under one roof
• Extensive product range
28PSG Konsult – Asset Management
Track record speaks for itself
3-month 6-month 1-year 3-year 5-year 10-year
Single manager funds Performance rank rank rank rank rank rank
Rank 10 7 6 14 4 1
PSG Flexible
Return 5.2% 13.5% 28.5% 17.9% 25.2% 18.6%
Rank 5 4 2 4 1 8
PSG Equity A
Return 8.4% 19.1% 34.9% 21.8% 28.6% 20.6%
Rank 25 10 9 18 3 10
PSG Balanced A
Return 4.1% 10.8% 21.4% 15.7% 19.4% 15.6%
All the experts under one roof 1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
29PSG Konsult – Asset Management
Top 3 PlexCrown overall ranking
Total Overall PlexCrown Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
Rank Score Rank Score Rank Score Rank Score Rank Score Rank
Coronation 4.906 1 4.657 1 4.499 2 4.576 1 4.544 1
Allan Gray 4.613 2 4.523 2 4.528 1 4.147 2 4.293 2
PSG 3.577 5 3.698 4 4.058 3 3.923 4 4.128 3
Nedgroup Investments 3.837 3 4.152 3 3.964 4 4.026 3 3.979 4
Prudential 3.362 8 3.508 7 3.294 7 3.552 5 3.726 5
Investment Solutions 3.438 7 3.618 5 3.414 6 3.388 6 3.419 6
Oasis 2.492 16 2.520 16 2.517 15 3.232 9 3.281 7
Investec 2.941 12 2.956 12 2.890 14 2.863 15 3.158 8
SIM 3.308 9 3.212
All the experts9 under
3.185 9
one roof 3.257 9 3.147 9
Old Mutual 3.031 10 3.200 10 3.036 10 3.136 11 2.993 10
30PSG Konsult – Asset Management
Equity team awards
2004: S&P Sector award: Flexible sector (3 years).
2004: S&P Sector award: Growth sector (1 year).
2005: Raging bull Sector award: General Equity (3 years).
2006: S&P Sector award: General Equity (3 years).
2010: Raging bull Sector award: Flexible (3 years).
2010: Raging bull: Best domestic AA Flexible fund (5 years).
2011: Raging bull Sector award: General Equity (3 years).
All the experts under one roof
2011: Raging bull: Best broad-based domestic Equity fund (3 years).
2011: Raging bull: Best domestic AA Flexible fund (5 years).
31PSG Konsult – Advisors
PSG Konsult advisors – the experts
192 offices Top Wealth Manager for Successful Entrepreneurs –
Business Day Investors Monthly survey for 2014
618 advisors
No. 2 Overall Top Wealth Manager – Business Day
+150,000 clients
Investors Monthly survey for 2014
R165bn AUA
Santam’s Top Personal Lines Broker of the year -
R1.9bn in premiums 2013 (3rd year running)
PSG PHILOSOPHY: ULTIMATE EMPOWERMENT AT PSG
Employ smart, competent individuals and empower them through TRUST
32PSG - Thembeka
PSG – Thembeka Capital
CREATING
SHAREHOLDER VALUE
NAV at Value created for
inception in NAV today = R2.7bn BEE investors
2006 = R1 (51%) ~ R1.4bn
33PSG - Curro PSG - CURRO
Education in SA 4 markets
– 4% of kids in private schools – Affordable private schools
in SA vs 13% globally
– High-fee schools
– Limited public school
capacity – Low-fee schools
– Few new schools built – Crèches
Huge opportunity!
34PSG - Curro PSG - CURRO
HIGHLIGHTS – Year ended December 2013
Largest private school group in South Africa
31 campuses; 27 263 learners (year 2020 target – 80 campuses; 90 000
learners)
Significant capital invested:
• Invested more than R1bn in 2013
• To invest ~R1.4bn in 2014
Planned rights issue in June 2014 to raise approximately R590m
Investment grade bond rating (BBB-); Secured credit rating (A-)
35PSG - Curro PSG - CURRO
Curro Durbanville
2013 ACADEMIC Curro Curro National
RESULTS IEB NSC
No of learners 310 631 654 723
Pass rate 100% 92% 78%
University
exemption 79% 52% 24%
Northern Academy Polokwane
Northern Academy school
4 500 learners
Around 50 - 70 learners per class
Tough conditions
99% matric pass rate
36PSG Private Equity investments 37 37
PSG Private Equity investments
Market leader in home and support centre
education
7 700 learners, with target of ~90 000
learners by 2020
Afrikaans and English, Gr 0 – 12
Accredited matric
120 support centres nationally
38PSG – Zeder Investments
A story of focused investments
Project Internal Focus
at Zeder
Rationalized portfolio to
5 core investments
valued at R4.9bn at
year-end
39PSG – Zeder Investments
Well known and loved consumer brands
Performing assets
Leading brands
Good management
Growth potential
Market cap R22bn
Through AVB, we
control 30.4%
Very good investment to date
Capital invested ~ R890m
Market value of investment ~ R2.4bn
40PSG – Zeder Investments
Through an improved strategy and motivated execution, Kaap Agri
continues to deliver strong results and has additional growth plans.
101st year of existence
167 operating points
Good results
Management has positive energy
Focus is to grow organically and through M&A
- Geographic expansion
- Range extension
41PSG – Zeder Investments
Over 70 years, Capespan has developed two large and complimentary
divisions which are increasingly less interdependent.
FRUIT LOGISTICS The fruit division produces,
procures, markets and distributes
fresh produce from more than 12
countries to more than 60 countries.
Through FPT and MCT, Capespan
offers a broad range of landside and
port logistic services in South Africa
and Mozambique.
A true global company with an
exciting opportunity in China –
Golden Wing Mau
42PSG – Zeder Investments
ZAAD
A seed business consisting of
Agricol and Klein Karoo Seed
Marketing (KKSB)
Agricol and KKSB have:
- Trusted brands
- A broad product range
- A strong geographic
footprint
ZAAD is a sizeable and profitable
company
43PSG Zeder Investments
Irrigated hectares
5,969
6,000
5,369
Commercial farming in Zambia 4,769
4,169
Target 10,000 ha under irrigation 4,000
Somawhe
Somawhe
4,397
4169
Somawhe 3,797
Africa/Zambia many opportunities Somawhe
2,597
3,197
– Poultry consumption 2.5kg per 2,000
capita in Zambia vs. 31.8kg in SA 420
Mkushi
1,572
Mkushi
1,572
Mkushi
1,572
Mkushi
1,572
Mkushi 420
– 40% of fresh water in Southern 0
2011 2012 2013 2014 2015
Africa
– 8 bordering countries – all net
importers of food
– Great opportunities in agriculture
Recently acquired Mpongwe Milling
– Leading milling business
complimentary to production
activities
44PSG CapitalPSG – Thembeka Capital
Strategic services for a range of clients
Approved sponsor and designated advisor to 32
companies listed on the JSE main board and AltX
Full spectrum of advisory services from M&A to
regulatory advisory
45PSG Group – one large “family” business
PSG philosophy is based on management as co-investors
Management as owners are generally focused and dedicated to
business growth
We employ smart and competent individuals and empower
them through trust
MORE THAN 70% OF PSG GROUP SHARES ARE HELD BY
DIRECTORS, FAMILY AND FRIENDS
46PSG – Themes for business success
Themes that have been established over
the life of PSG Group
Creating shareholder wealth
Ultimate empowerment
Focusing on clients
“Project Internal Focus”
Giving back to society
Trust and integrity
47PSG – Themes for business success
HAVING A POSITIVE IMPACT ON YOUR ENVIRONMENT
“You cannot sleep in peace if your neighbour is hungry”
Anton Rupert
A successful company:
Employs
Trains
Educates
Pays taxes
Gives back
For the period ended February 2013
48PSG – ThemesGiving at PSG Group
for business success
Akkerdoppies
Early childhood development
High-quality affordable preschool
services to children from Idas Valley,
Cloetesville and Khayamandi
Beneficiaries: 160 children aged
under 7 years
49PSG – ThemesGiving at PSG Group
for business success
Think and plan what you want to do in life
Discuss your plans with your loved ones
Your plans will come to life
Focus on executing your plans with enthusiasm and you will
prosper in the years ahead
BELIEVE IN YOURSELF
50THANK YOU QUESTIONS?
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