South Africa: BAT JSE Listing 'Would Give Market a Fillip'

Source from:  Business Day (Johannesburg) 8 July 2008 07/09/2008

IF BRITISH American Tobacco (BAT), which is 10,6% held by local investment holding company Remgro, were to list on the JSE, the transaction would be significant for the domestic stock market because BAT's market capitalisation, at £39bn, was similar to that of Anglo American, one of the JSE's two largest stocks, according to Simon Raubenheimer, a senior analyst at Allan Gray. Allan Gray holds in the region of 5% of Remgro and Raubenheimer voiced his confidence in BAT's ability to sustain and grow profits irrespective of global conditions. Last month, Remgro released a positive set of annual results and confirmed that a secondary listing for BAT on the South African bourse was under investigation. Remgro is splitting out its tobacco interests because of changes in the legal and financial environment in Luxembourg. This is where Remgro's joint venture partner, Richemont, is listed. Remgro CEO Thys Visser said a South African listing for BAT would mean local shareholders could benefit from the distribution of shares. At the time the head of the JSE, Russell Loubser, said it would be "very exciting" if BAT were to make the leap. He agreed the listing might add some stability to SA's resource-heavy stock market. "In good times or bad times people still find the money to buy a packet of cigarettes," Loubser said. This might mean that the stock would be less vulnerable to the cyclical nature of SA's markets. Raubenheimer mooted this idea in his report and said there was "an inherent stability that characterises tobacco consumption". "Despite a proliferation of increasingly antagonistic regulatory changes over the past decade, BAT has managed to grow its earnings by over 10% annually," Raubenheimer said. Remgro said yesterday no decision had yet been taken about listing BAT on the local stock market and that if and when the need arose, it would release the news via the Stock Exchange News Service. The JSE also said yesterday that no discussions had yet taken place. With Remgro's annual financial results now in the public domain, the company will be preparing for an annual general meeting within the next two months, which should allow shareholders to make their feelings known on the BAT listing. But since the beginning of last month seven market analysts have put out new ratings on Remgro and five out of the seven thought the stock was a good one to buy. Most analysts also upgraded the 12-month target price for Remgro's share, with Investec being the most recent to upgrade its target, from R235 a share to R236,25 a share. The share has averaged R195,30 this year and is trading about 7% lower. This is in line with the JSE's all share index. While BAT would be a huge coup for the JSE, new listings this year have fared badly. So far there have been 13 new listings and eight delistings. Of the 12 new listings that were tracked, every single one had experienced a drop in its share price. Enditem