Our opinion on the current state of BRT

Brimstone Investment Corporation Ltd. stands as a significant black-controlled investment holding company in South Africa, with a diversified portfolio spanning various sectors. Its strategic investments in key industries, including fishing, insurance, clothing manufacturing, education, and healthcare, reflect a broad approach to capturing value across the South African economy. Notably, Brimstone's majority stake in Sea Harvest and significant holdings in Oceana underscore its strong position in the fishing industry, an essential sector in South Africa's economy.

However, Brimstone's journey has not been without challenges. The decision to cease operations of Lion of Africa Insurance due to unprofitability and the downsizing in House of Monatic highlight the difficulties faced in some ventures. Despite these setbacks, Brimstone has demonstrated resilience and adaptability, notably through strategic disinvestments in non-core or underperforming assets, allowing for significant debt reduction.

Brimstone's financial performance for the six months ending on 30th June 2023, showcasing a 17% increase in revenue and a notable 239% surge in headline earnings per share (HEPS), indicates a robust operational recovery and financial health. This performance is further reflected in the company's intrinsic net asset value (INAV), although it experienced a slight decrease from the previous year. The trading at a substantial discount to INAV highlights a potential undervaluation by the market, presenting an opportunity for investors.

Looking forward to the year ending 31st December 2023, Brimstone's projection of an increase in HEPS by 1% to 7% signals continued positive momentum. However, the limited liquidity of its shares, particularly the ordinary shares, poses a challenge for private investors seeking entry or exit points. This liquidity issue, coupled with the current discount to INAV, suggests that unlocking value for shareholders may require further strategic actions, potentially including portfolio unbundling or other measures to enhance shareholder returns.

In summary, Brimstone Investment Corporation embodies the complex dynamics of investment holding companies in emerging markets, balancing strategic growth opportunities against operational challenges and market perceptions. While its diversified portfolio offers exposure to key sectors of the South African economy, investors must navigate the nuances of liquidity and market valuation. As Brimstone continues to refine its investment strategy and operational focus, the potential for value realization remains, contingent on strategic execution and market conditions.