South Africa - PSG - After Two Years of Watching, Top European Money Manager Explains Why He's Now Bought Into PSG Group - Travel High School

After two years of watching, top European money manager explains why heʼs now bought into PSG
Group - Travel High School 11/13/18, 6(56 PM
CAPITEC BANK • CURRO • GERRIE FOURIE • JANNIE MOUTON • PIET MOUTON •
PSG ALPHA • PSG GROUP • PSG KONSULT • ROB VINALL • RV CAPITAL •
SA INVESTING • TRAVEL • ZEDER
After two years of watching, top

European money manager explains
why he’s now bought into PSG Group
! 4 months ago " 11 Min Read
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After two years of watching, top European money manager explains why heʼs now bought into PSG Group - Travel High School 11/13/18, 6(56 PM
Commerce PSG on Straightforward Equities
TravelHig
LONDON — My first publicity to super-smart money manager
hSchool Rob Vinall was in 2014 when he was one of the presenters on
the Worth Investor’s convention forward of the annual Berkshire
Hathaway AGM in Omaha. Vinall, who operates from his German
# regulated boutique from Switzerland, is what the business calls a
“high conviction” investor. Once we met 4 years in the past his
Add
then $120m fund was unfold between simply 10 shares. The
Comment truth that one of them was Google supported my very own liking
of the story and triggered us going huge on it within the Biznews
International Share portfolio. Given the portfolio’s reputation –
 and Google’s surging share worth –many in South Africa have
thus unwittingly benefitted from Vinall’s experience. I’ve stored
Share
an eye fixed on his work, as one does after that sort of expertise,
This! so shortly picked up a South African connection in his newest
letter to buyers which covers exercise in the course of the first
half of 2018. After watching the inventory for two years, RV
Capital has simply invested within the Mouton family-controlled
PSG Group and added it to the portfolio, its solely JSE-listing.
Given RV’s excellent monitor report, tight focus of its
investments and the truth that Vinall has the entire world to
select from, the choice of PSG is a large plaudit for the Moutons.
Right here, with the writer’s permission, is how he defined the
PSG funding to buyers in his €200m Enterprise Proprietor Fund.
– Alec Hogg
By Rob Vinall*
In early 2018, I constructed up a stake in PSG Group, a South

African funding holding firm. Its 5 largest holdings are Capitec
Financial institution (a retail financial institution), Curro (a
supplier of personal faculty schooling), PSG Konsult (a wealth
and insurance coverage advisor community), Zeder (a holding
firm for meals and associated companies), and PSG Alpha (an
early stage funding firm). Apart from PSG Alpha, they’re listed on
the Johannesburg Inventory Trade, whereby some of Alpha’s
companies are themselves listed.
Rob Vinall
I first heard about PSG when one of Capitec’s founders enquired

about turning into a co-investor in Enterprise Proprietor in early
2016. I learn up on Capitec after which PSG, initially out of
politeness, however was shortly stunned by what I learnt. Once I
began the fund, I hoped that a community of fellow enterprise
house owners would develop and help me in sourcing and
analysing funding alternatives. It’s nice to see this materialising.
PSG started life in 1995 when Jannie Mouton bought a

controlling stake in PAG (Skilled Task Group), a recruitment
company for about ZAR three.5m. Shortly after this, he began a
stockbroking operation in PAG referred to as PSG (Skilled
Securities Group). Jannie bought the recruitment enterprise a yr

and a half later for ZAR 107 m, giving him his first house run.
PAG was subsequently renamed PSG Group.
Prior to purchasing PAG, Jannie was

fired from SMK, a stockbroking
enterprise he based. PAG was each a
lifeline out of the funk he descended
into after being fired and a brand new
canvass to work on. PSG is his life’s
work, one thing he movingly talked
about in a current letter when he
introduced he had early stage
Dementia. In case you are within the
firm’s historical past, I like to recommend Jannie’s
autobiography: “and then they fired me”.
Out of PAG grew in the present day’s PSG Group, an organization

with a market worth of ZAR 50 bn (€four bn). Since 1995, PSG
has compounded capital at almost 50% p.a., an astonishing
price. This was achieved by means of astute monetary
investments in addition to early-stage investments in personal
companies. Three of these (Capitec, Curro, and Konsult) account
for 80% of the PSG’s sum of the elements worth. As we speak,
the main target is on creating its present companies, and
beginning companies or shopping for them at an early stage.
In 2010, Jannie handed on the day-to-day operating of PSG to his

son, Piet. Jannie stays lively as Chairman and largest
shareholder. During the last years, I’ve acquired to know Piet in
addition to senior executives at PSG’s subsidiaries nicely. They’re
gifted, motivated and, most significantly, high-quality individuals.
I couldn’t be happier to co-invest with them.
I view our funding in PSG Group as having two buckets of worth:

the listed corporations and future worth creation from capital
allocation.
Capitec Financial institution Holdings
The most important holding, accounting for 55% of PSG’s NAV, is

a 31% stake in Capitec Financial institution. Capitec is a branch-
based retail financial institution with 4 core merchandise: Save,
Transact, Insure and Credit score, overlaying South Africans’
primary monetary wants. It was began in PSG’s workplaces
within the early 2000s. Right now, Capitec is South Africa’s

second-largest financial institution with 10 m clients and a 28%
share of the employed inhabitants. What makes Capitec
particular is a rigorous give attention to 4 values: Simplicity,
Affordability, Accessibility and Personalised Service. In case you
are questioning what “Accessibility” means, it actually
means entry – previous to Capitec, lower-income clients needed
to wait an hour or extra at peak hours to make use of an ATM or
be served in a department in the event that they have been
taken as clients in any respect.
A Curro faculty in Nelspruit
The second largest funding is a 55% stake in Curro, accounting

for 14% of NAV. Curro builds and operates personal faculties. It
was began in 1998 by Chris van der Merwe with 28 faculty
youngsters in a church sacristy. PSG turned the most important
shareholder in 2009 when Curro had simply three faculties.
Immediately, it has 138 faculties on 59 campuses with over
52’000 faculty youngsters. Curro brings reasonably priced
schooling to center and better revenue households who’re
underserved by the prevailing faculty system. Its faculty charges
begin in Curro Academies at ZAR 1’700 per thirty days (simply

over €100). For this, the pupil will get a first-class schooling in a
faculty with trendy educational and sporting amenities.
The third largest funding,

roughly equal in
measurement to Curro, is
a 62% curiosity in PSG
Konsult. It has its roots within the dealer arrange in PAG. Konsult
offers wealth administration providers to prosperous South
Africans. It has 784 advisors understanding of 211 workplaces. It
additionally has an asset administration enterprise and a
business insurer. A key factor of Konsult’s success is
decentralisation. The branches maintain 70% of their income
and have full autonomy over how they run their enterprise. For
its 30%, Konsult takes over back-office duties, permitting the
advisors to concentrate on their clients.
Different essential holdings of PSG Group accounting for roughly

20% of NAV are Zeder, PSG Alpha, Dipeo, a BEE (Black Financial
Empowerment) funding fund owned 49% by PSG, and PSG
Capital, a company finance and advisory boutique.
The second bucket of worth is PSG’s potential to allocate capital.

Traits of all its investments are easy-to-understand companies;
giant markets, that are underserved by incumbents; unbiased
and gifted working managers; differentiated enterprise fashions;

and a South Africa focus. I anticipate this playbook, that has
served PSG so properly prior to now, to proceed to take action
sooner or later. PSG has a promising pipeline of earlier stage
investments in PSG Alpha, together with Evergreen (retirement
villages), Power Companions (photo voltaic and different power
belongings), and FutureLearn (distance studying), and no scarcity
of new funding proposals given its extensive community and
first-class status.
Why we’re invested in PSG
The Moutons: I see within the Mouton household a dedicated

proprietor with a deep love for PSG. This reduces the danger of
paperwork, waste, politics, mistaken incentives and all the
opposite issues that blight the typical enterprise. It’s a pleasure
to take a position alongside them.
PSG Chairperson and Founder Jannie Mouton
Widening Moats: PSG’s companies take pleasure in widening

moats. For instance, Capitec is rising quicker than its rivals,
constructing each scale and buyer loyalty. Curro can regularly
enhance its curricula based mostly on a suggestions loop from
its 138 faculties. Most significantly, the PSG’s means to allocate
capital opportunistically constitutes a widening moat. In
distinction to a one-product or service firm, it might allocate
capital to what probably the most promising enterprise
alternatives, continuously upgrading its enterprise combine.
Progress: PSG can develop inside its listed companies. For

instance, Capitec has simply 2.7% of the buyer credit score
market in South Africa. Curro offers education to only zero.four%
of school-aged South African youngsters. Inside its unlisted
companies, I’m hopeful that at the least one will turn out to be a
considerable enterprise over time. Evergreen and Power
Companions are probably the most promising prospects, for my
part.
Tradition: PSG has a robust tradition, the inspiration of which is

decentralisation or what Jannie phrases “Ultimate
Empowerment”. It’s extremely troublesome to create a tradition
the place individuals have authority and duty while on the similar
time sustaining robust controls. When it really works, it
unleashes human potential.
Capital Allocation: The corporate allocates capital nicely. Most

significantly, that is based mostly on its tradition, organisational
talents, and fame versus the brilliance of anybody particular
person. As such, it ought to persist over time.
Function: All of PSG’s companies are infused with a robust sense

of objective, similar to offering odd South Africans entry to
monetary providers or an honest schooling. They serve to make
the nation higher and extra affluent. This creates a win-win-win
between PSG, clients, and society.
South Africa: You could have been disconcerted to see a South

African firm within the portfolio. There’s a drumbeat of
damaging information in South Africa. The recommendation of
the locals is to get your capital out, not in. Nevertheless, I like
PSG as a result of it’s in South Africa, not regardless of it. To an
investor, a shortage of capital is a plus, not a minus. PSG is
uniquely tailored to the surroundings there given its expertise,
community and fame. Most significantly, the underdeveloped
nature of the financial system creates the chance to construct
corporations the place the State or huge enterprise has failed
atypical South Africans, comparable to banking and education.
Such alternatives are scarcer, by definition, in developed
markets. PSG is what Nicholas Taleb would time period an anti-
fragile enterprise. The harder issues get in South Africa, the extra
alternative for PSG.
Why Purchase now?
I first visited Piet in Stellenbosch in 2016. I didn’t purchase then

as I had not recognized the corporate lengthy and the worth was
not proper. The passage of time took care of the primary
objection and a double whammy of dangerous information early
in 2018 took care of the second.
Via no fault of its personal,

PSG acquired caught up
within the Steinhoff debacle.
Steinhoff had a big stake in
PSG that was positioned out
there in January. The
expectation of the location
depressed PSG’s share worth. Shortly after the location, a brief
vendor revealed a important report on Capitec. This depressed
the share worth additional.
The report questioned the integrity of Capitec’s accounts and

therefore the individuals operating the financial institution. I’ve
had the fortune to spend time with Capitec’s CEO Gerrie Fourie
(pronounced “HGerrie”, not “Jerrie” as I learnt to my
embarrassment in entrance of a number of hundred individuals

at PSG’s shareholder assembly). Gerrie is mission and course of
pushed in equal measure. The chance to guess on his integrity is
my definition of a fats pitch.
For our stake in PSG, we paid round 20x ahead after-tax

recurring earnings. For that, we obtained the quickly rising
companies within the present portfolio, one of which (Curro)
solely modestly contributes to earnings on account of losses at
newly opened faculties, and the longer term worth creation from
the early stage companies, some of that are in PSG Alpha’s
portfolio and a few of that are but to be bought.
Rob Vinall is the proprietor of the Swiss-based unbiased fund

administration enterprise RV Capital. His funding universe is
worldwide, predominantly in listed equities. Focus in single
shares is excessive with the top three holdings sometimes
accounting for 50% or extra of fund belongings. His buyers are
usually personal people, household workplaces and
endowments.
Alec Hogg
July 27, 2018
Capitec Financial institution, Curro, Gerrie Fourie, Jannie Mouton,
Piet Mouton, PSG Alpha, PSG Group, PSG Konsult, Rob Vinall, RV
Capital, Zeder
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After two years of watching, top European money manager explains why heʼs now bought into PSG

Group - Travel High School 11/13/18, 6(56 PM

CAPITEC BANK • CURRO • GERRIE FOURIE • JANNIE MOUTON • PIET MOUTON •

PSG ALPHA • PSG GROUP • PSG KONSULT • ROB VINALL • RV CAPITAL •

SA INVESTING • TRAVEL • ZEDER

After two years of watching, top

Commerce PSG on Straightforward Equities

In early 2018, I constructed up a stake in PSG Group, a South

I ﬁrst heard about PSG when one of Capitec’s founders enquired

PSG started life in 1995 when Jannie Mouton bought a

Securities Group). Jannie bought the recruitment enterprise a yr

Prior to purchasing PAG, Jannie was

Out of PAG grew in the present day’s PSG Group, an organization

In 2010, Jannie handed on the day-to-day operating of PSG to his

I view our funding in PSG Group as having two buckets of worth:

Capitec Financial institution Holdings

The most important holding, accounting for 55% of PSG’s NAV, is

within the early 2000s. Right now, Capitec is South Africa’s

A Curro faculty in Nelspruit

The second largest funding is a 55% stake in Curro, accounting

begin in Curro Academies at ZAR 1’700 per thirty days (simply

The third largest funding,

Diﬀerent essential holdings of PSG Group accounting for roughly

The second bucket of worth is PSG’s potential to allocate capital.

and gifted working managers; diﬀerentiated enterprise fashions;

Why we’re invested in PSG

The Moutons: I see within the Mouton household a dedicated

PSG Chairperson and Founder Jannie Mouton

Widening Moats: PSG’s companies take pleasure in widening

Progress: PSG can develop inside its listed companies. For

Tradition: PSG has a robust tradition, the inspiration of which is

unleashes human potential.

Capital Allocation: The corporate allocates capital nicely. Most

Function: All of PSG’s companies are infused with a robust sense

South Africa: You could have been disconcerted to see a South

Why Purchase now?

I ﬁrst visited Piet in Stellenbosch in 2016. I didn’t purchase then

Via no fault of its personal,

The report questioned the integrity of Capitec’s accounts and

embarrassment in entrance of a number of hundred individuals

For our stake in PSG, we paid round 20x ahead after-tax

Rob Vinall is the proprietor of the Swiss-based unbiased fund

July 27, 2018

Capitec Financial institution, Curro, Gerrie Fourie, Jannie Mouton,

Make Higher Selections. Begin your Biznews Premium FREE

About the author

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