Pallinghurst minds the gap as it targets LSE

[miningmx.com] — THE worsening gap between the Pallinghurst share price and its net asset value (NAV) has finally goaded management into action to try and do something about it.

Pallinghurst is now looking at a possible listing on the LSE, in addition to its listing on the JSE, so as to “further broaden the shareholder base and stimulate demand for the company’s shares”.

In March, when Pallinghurst presented its results for the year to end-December, its share price stood at 429c against an NAV of 610c which amounted to a discount of around 30%.

The latest interim numbers for the six months to end-June show an NAV of 634c – using the current exchange rate of R7.74/$1 – but the Pallinghurst share price has dropped to 314c ,meaning it now stands at a discount to NAV of 50%.

The Pallinghurst share price has underperformed badly since it listed on the JSE in August 2008 and started trading at levels around 900c.

Ahead of the move to the JSE the company was initially listed on the Bermuda stock exchange after a private placing to South African institutions and private investors at 700c.

In his review of the interim results for the six months to end-June chairman Brian Gilbertson said “the board is very much aware of the gap between the company’s net asset value and its market capitalisation on the JSE, and that this gap has widened recently.

“A valuation gap is not uncommon for investment holding companies and is generally attributable to lack of control over the underlying investments.

“However, while our company does not hold 50% of any of its portfolio investments our strategic partners, the Pallinghurst co-investors, collaborate under the guidance of the investment manager and, accordingly, there is collectively control over each investment.’

Gilbertson added: “I am confident in the value inherent in each investment platform and remain of the view that each is uniquely placed to benefit as markets stabilise, developing economies continue to grow and as our strategies for each progresses to its logical outcome.’

Gilbertson did not appear that concerned on the issue in March when he was quizzed by analysts on the issue at his Johannesburg presentation of the 2010 annual results.

He said at the time “clearly, such a large discount is not in the interests of shareholders and it is a worrying factor that we need to deal with.

“It’s something we are looking at, but we have not come to any conclusions at this stage on how to best address this issue.”

Since then it seems investor attitudes towards Pallinghurst have soured considerably because of the widening NAV gap and because of negative perceptions over the complex partnership structures through which Pallinghurst controls its various operations.

Pallinghurst CEO Arne Frandsen said, “notwithstanding the volatile markets and macro-economic crises that have characterized 2011 to date, the company’s net asset value has been protected and, while slightly lower than that at the beginning of the year, the NAV has increased from one year ago.”

– The writer owns shares in Pallinghurst.