Our opinion on the current state of REINET(RNI)

Reinet Investments S.C.A. (RNI) is an investment holding company, with its primary asset being a significant stake in British American Tobacco (BAT), constituting roughly 2.12% of BAT's shares. This stake is valued at approximately $1.8 billion and represents about 31% of Reinet's net asset value (NAV), a substantial decrease from 85% a decade ago. The reduction in the proportion of BAT's contribution to Reinet's NAV is primarily due to the declining share price of BAT, influenced by challenging regulatory environments for tobacco products, particularly in the United States where potential legislative changes regarding menthol cigarettes are being considered.

Despite the falling price of BAT shares, Reinet has not shown a strong inclination to divest from BAT, which continues to deliver robust dividend returns, especially from markets in developing countries, even as cigarette sales in developed nations decline. As BAT's share price has dropped, other assets within Reinet's portfolio have grown in relative importance. Notably, Reinet holds a 46% stake in Pension Insurance Corporation (Penscorp), which now accounts for 36.8% of its portfolio.

Besides Penscorp, Reinet also manages a diverse array of private equity investments, making up around 15% of its portfolio. As of the fiscal year ending on 30th September 2023, Reinet reported a NAV of 30.89 euros per share, a slight decrease from 31.46 euros in the previous year, reflecting a 1.8% decline. This decrease was attributed to reductions in the fair value of several investments, including its holdings in BAT, Pension Corporation, and the Prescient China funds.

On 22nd January 2024, Reinet updated its NAV to 33.47 euros per share, reflecting a total value of 5.734 billion euros with 171.3 million shares outstanding. By 31st March 2024, the company's NAV further adjusted to 3611 euro cents per share.

The company's stock performance has been somewhat volatile, especially in response to global events and announcements, such as the BAT's decision to write down the value of its U.S. operations by GBP 25 million (approximately R595 billion), which led to a 10% drop in BAT's share price. This impact on BAT also indirectly affected Reinet's share valuation.

Reinet's shares serve as a hedge against the rand's weakness, benefitting from any depreciation in the South African currency. Investors considering Reinet should thus weigh the potential risks associated with its significant exposure to BAT and the broader tobacco industry's regulatory challenges, alongside evaluating the stability and growth potential of its other investments like Penscorp and its array of private equity assets. As always, the future prospects of the rand and its impact on Reinet's performance should be carefully considered.