Views Article – Sharenet Wealth

Editor's Choice, South Africa

Prescient: New Buy Prescient To Boost Stellar Cash Flows



Charles Pettit – Stellar CEO

Stellar Capital, the R1.3 billion financial services group has now completed the deal where it buys a major part of Prescient, another financial services group, for R720 million. 

Prescient’s local assets under management are currently R77 billion. The year before, the assets under management were only R67 billion.

Prescient was previously listed on the JSE but is now a subsidiary of Stellar, with the balance of the company owned by the Prescient management team. 

Stellar believes Prescient offers many opportunities for high growth, including: index tracking funds, liability driven investing, international expansion opportunities and a BEE deal for the South African operations. 

Prescient also has the potential to pay big dividends due to its low working capital requirements, and these should grow at 12-15 percent per annum in line with the expected growth rate for the business. 

Top billionaire retailer Christo Wiese is an anchor shareholder at Stellar and owns close to 20 percent of the company’s share capital on a diluted basis. 

“We are pretty good at growing businesses and have a track record at it,” says Charles Pettit, the Stellar CEO. 

He believes the key statistic when analysing Stellar is its net asset value. That currently stands at R1.67 per share against a share price of R1.20. But Charles believes over the next three years the company will comfortably achieve its targeted NAV per share growth rate of 15% per annum.


Another business that looks set to do well in the Stellar camp is Torre, the major component of Stellar’s industrial portfolio. Although Torre has had difficult years, the outlook for the business is improving as the economy recovers and the restructurings of the past 18 months begin to bear fruit. 

“All our businesses are making profits, and we are optimistic for the future”, says Charles.

Stellar has had solid results and has a very high quality anchor investment in Prescient. It is clearly undervalued at R1.20 which is 28% cheaper than its stated net worth of R1.67. This is a highly attractive discount given the strong cash flows and high growth potential of the portfolio. 

Jeremy Woods

Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called “Special Payments”, which was a best-seller on publication, and optioned three times for a film.

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