Kokkie Kooiman: selling Investec


Kokkie Kooiman: Coronation Asset Management. During the third quarter of this year institutional investors offloaded something like 90m Investec shares. Coronation sold virtually all of its shares in the banking group, about 40m of them, and we’re joined now by the man whose research would have helped fund managers at Coronation make that decision. Kokkie Kooiman. Kokkie thanks for joining us. Before we get onto hearing your views on Investec’s London listing, Kokkie, what made you sell Investec so aggressively during the third quarter?

KOKKIE KOOIMAN: I must give credit there to Neville Chester, our analyst who does all the nitty gritty … on 30 June, specifically in our financial services fund, we were still 10% in Investec, and at that stage the market was looking at 24% earnings per share growth of Investec, and the more Neville did his work, the more he could see that they had such a good year last year, specifically in the UK operations, they were going to battle, with the markets being very down, to make somewhere between 10% and 15% for the year. So you knew the market was looking for higher earnings and as the market would see that they’re not going to make 24%, it would sell it off. So we were just trying to be ahead of the market – which we were. Having said that, I sold down by [indistinct] to about 3%, and I must say I was very reluctant. I mean, I’ve known Steven and Bernard and the guys at Investec for many years, and you don’t get a better management team than those guys. But since the share hit R155 I’ve started buying back every time it got below R155. So I’ve increased my weighting by more than 50% because the market then always overreacts – I think it hit R142 at one stage, and that was just totally overdone.

MONEYWEB: OK, Kokkie, let me just see if I’ve got it right now. So you sold off about 40m shares in the third quarter. What price did you average on those?

KOKKIE KOOIMAN: I haven’t got it in front of me, but I must admit that at one stage, when the price was still $220, we were buying. It went to a high of R240 and so we started selling at about R230. And then sold all the way down to R180, R170 even. I don’t think we sold much below that. So on average most probably R200.

MONEYWEB: Which is a pretty good average. And now you’ve been buying back. How many shares have you bought in this fourth quarter?

KOKKIE KOOIMAN: Yes, I don’t have that exactly but, roughly, in my own fund I was 3%, [indistinct] I’m now about 4.5%, 5%, so 3% of the fund, about 700m. Anybody who wants to can do the quick calculation.

MONEYWEB: All right, we’ll go back to the transcripts and find your numbers a little later on. Now, the Investec London listing, Kokkie. You obviously must have some sort of confidence in it. Lots of cheers yesterday. Do you think that they got second prize from the Ministry of Finance instead of a primary listing there, getting just another listing? Having to split the company in two?

KOKKIE KOOIMAN: It’s a very complicated structure and I’ve been spending a lot of time on it today. Even to try and explain it now is quite complex, but it’s better than nothing. In fact Investec have always shown that they’re a growth company, have always done their acquisitions very well. Never overpaid, always have been ruthless in going into anything they take over, turning it around. So I think it sets the stage for the next round of growth for Investec. They have proven that they can build businesses offshore. They’re not as profitable yet, but it takes time. Competition is very stiff out there, but I think this is a lot better than being constricted to South Africa.

MONEYWEB: In August, Steven Koseff did say on this programme that he would split the company in two as a last resort. This seems to have been the case. Do you think the Ministry of Finance said take it or leave it?

KOKKIE KOOIMAN: Yes. In the end they had to take it. But you know the company from a shareholder point of view … [indistinct] each shareholder of the four units, be they the two South African units or the two similar units in the UK, will have an economic right to the full Investec group and to its earnings.

MONEYWEB: Absolutely. And do you think that the fact that it is going to be listed separately with very complicated agreements between the two – between the PLC listing and the Investec group listing in South Africa – do you think that these agreements are going to be feasible? Isn’t there a lot of admin, a lot of hassle involved?

KOKKIE KOOIMAN: Yes, there is. We’ve already thought of a number of complications that can arise – I’m sure over time they’re going to be changed and, I hope, simplified. But it’s workable and for a group of Investec’s size, the cost is minuscule in terms of their total asset base and earnings base.

MONEYWEB: According to the results yesterday, Investec’s bedded down the Fedsure deal. They seem very happy with the way that’s finally all just worked out. They’ve clearly got some management time on their hands, so the timing of this listing is beneficial?

KOKKIE KOOIMAN: Yes, in fact the listing will most probably only occur in July, August next year, so it gives them more time. And I think what is then in their favour … Investec in the end is really geared towards the equity market. You can see that. The cost base has grown, so once equity markets get better, then the rating will improve, the earnings will come through. So I think if they were to list now it wouldn’t serve much purpose to issue any stock, whereas in a year’s time it will be hopefully a much better environment for them.

MONEYWEB: What are the chances that Investec’s got its eye on some sort of juicy acquisition sitting in the UK? They’ve been waiting for this listing to come through and they’re priming themselves for that.

KOKKIE KOOIMAN: Look, I know those guys. They’re always on the lookout, so I’m sure there are a lot of targets they have been looking at. And knowing that they can get a listing now, it will enable them to debt fund temporarily, knowing that the listing will go through. So one potentially could see action if the right price has become available.

MONEYWEB: Arthur Buchner from BoE Securities was saying earlier on the programme that he wasn’t as big a fan of the London listing as a lot of other people seem to be, including yourself. Saying he’s concerned that perhaps this is not necessarily going to translate into higher earnings for Investec and, if they’re not careful, they could burn their fingers.

KOKKIE KOOIMAN: There are shareholders who are concerned about them doing a UAM like Old Mutual did. I think you must look at Investec’s history. They’ve never overpaid for acquisitions and, secondly, I think one thing they have learnt is that the cost of issuing paper is very expensive, so I think they’re going to be a lot more selective in terms of issuing new shares. They know the effect that it has longer term on your having to pay dividends on the ROE, on the NAV. So I think you will see a lot more debt financing and a more limited issue of scrip.

MONEYWEB: Kokkie Kooiman from Coronation, thank you very much for your views on tonight’s Classic Business. He gives it the thumbs up and certainly Simon Tippet at Old Mutual Asset Managers, who I spoke to earlier today, also gave it the thumbs up. After listing to all of that Arthur, have you changed your mind yet, do you feel a little warmer and a little fuzzier towards the London listing, or are you sticking to your guns?

ARTHUR BUCHNER: Well, if I was an asset manager and I was long on a lot of Investec, I wouldn’t give you the thumbs down, until I’d sold. So, you know, it’s good to talk your book and maybe the index trackers actually do push it up and give you an opportunity to get out at better prices, but I think that it’s not going to be as earnings enhancing as what is predicted.

MONEYWEB: Great. That’s Arthur Buchner, of course, and Kokkie Kooiman, the biggest seller of Investec in the third quarter of this years, says he started to buy shares once again. Around the R150, R160 level – if you want to do the sums on exactly how many he’s bought, you can go to Moneyweb tomorrow morning and have a look at the transcript. All those numbers are there.

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