RMH shareholders to get a large dividend

The sudden dive in the share price of RMB Holdings (RMH) wasn’t unexpected. The nearly 70% drop from R1.96 to 60 cents last Wednesday (5 October) happened because it was the last day to trade in the special dividend of nearly R1.17 per share following the sale of the company’s Atterbury Europe property portfolio and the distribution of other money.

RMH previously informed shareholders that it had received approval in terms of exchange control regulations and that the special dividend will be paid on Monday, 10 October.

Earlier, RMH told shareholders that the sale of Atterbury Europe had been settled at the beginning of September.

“Further to the announcement released on Sens by RMH on 7 September 2022 advising that the disposal of Atterbury Europe Holding B.V. had become unconditional, RMH is pleased to announce that the disposal has been implemented and the sale proceeds received on the same day.

“The board of RMH is of the view that the sale proceeds should be distributed to shareholders in the form of a special dividend,” it added at the time.

Proceeds of the sale amounted to R1.75 billion, equal to just less than R1.24 per RMH share.

“Taking into consideration the stated strategy of RMH, being the realisation of the portfolio over the next four to five years, balanced against the liquidity requirements of RMH, the board of RMH has decided to return additional capital on hand to shareholders, resulting in an increase in the special dividend by 17.7 cents per RMH share,” reads the notice of the dividend.

“The additional capital emanates from the return of some of the cash endowment retained to fund the operations of RMH as well as a repayment by Atterbury Property Holdings Proprietary Limited of close to R45 million on its facility with RMB, a division of FirstRand Bank Limited, guaranteed by RMH through a cash cession,” the note adds.

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RMH declared a gross special dividend of nearly R1.42, of which just less than 18 cents is paid out of contributed tax capital and not subject to dividend-withholding tax.

The balance (R1.23 per share) is payable out of income reserves and will be subject to dividend-withholding tax at a rate of 20%. The total net dividend amounts to just less than R1.17 per share.

The current share price of 56 cents per share, as per Friday’s close on the JSE, values the remainder of RMH at around R790 million.

Brian Roberts, CEO of RMH Properties, supplied Moneyweb with a list of what is left following the sale of Atterbury Europe:

• 5% share in Atterbury Property Holdings;
• 3% share in Divercity Property Fund;
• 9% share in Integer Properties 1;
• 20% share in Integer Properties 2;
• 50% share in Integer Properties 3;
• A cash endowment that is used to fund the working capital of RMH; and
• A cash deposit that is pledged as security for a loan Rand Merchant Bank has made to Atterbury Property Holdings

Roberts is also named as a director of Integer Properties, according to the company’s website.

What are the assets worth?

“It is interesting that your question is ‘What are the assets worth?’ as opposed to ‘What is the value of the assets?’,” says Roberts in response to questions from Moneyweb.

“The value of the assets is determined by external auditors and property valuers who are governed by International Financial Reporting Standards and internationally recognised valuation methodologies respectively.

“What the assets are worth is the exchange price at which the RMH board and its shareholders would be willing to sell an asset.

“The factors that are considered in determining what an asset is worth are not the same as those used by auditors and property valuers to determine the value of an asset,” he adds.

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“The concept of what a property is worth will be different for RMH, a company with a stated strategy of monetisation [as apposed] to a listed Reit [real estate investment trust] that has a strategy of paying dividends with no obligation or necessity to dispose of its properties. The value of that property will be the same to both RMH and the listed Reit.”

“What the RMH assets are worth can only be determined once an arm’s length offer is received for an asset, and that offer has been assessed and recommended by the RMH board and the RMH shareholders have approved the offer price.

“That is how worth is determined,” says Roberts.

His explanations follow criticism from shareholders that RMH could have – or should have – held out for a better price for Atterbury Europe.

RMH started the process to liquidate its assets in 2020 when it unbundled its shareholding in FirstRand to its shareholders. That unbundling unlocked approximately R5.41 billion for shareholders who got to own FirstRand shares directly rather than through RMH.

Management then said shareholders received greater value than the then closing price of RMH of around R53. “If the RMH unbundling were effected on Thursday, 9 April 2020 (being the last practicable date prior to finalisation of the announcement), shareholders would receive R56.61 in value,” according to documentation outlining the process.

Shareholders got R53.28 worth of FirstRand shares for every RMH share while the property portfolio was valued at R3.33 per RMH share at the time, which was before the Covid-19 financial fallout hit the commercial property sector.

Property punt

RMH then said that RMH would remain listed on the JSE and, appropriately capitalised with a portfolio of property development assets in SA and Eastern Europe, had the potential to deliver growth in terms of net asset value over the medium to long term.

Unfortunately, things changed due to the Covid-19 pandemic, rising inflation and interest rates worldwide, and the Russian invasion of Ukraine.

RMH decided investors might be able to do better for themselves, and by themselves.

Roberts says RMH will continue in its current form and will continue to execute on the stated strategy of monetising the remaining assets over the next four years, but declined to speculate on how much shareholders can expect.

“The RMH board will continue to assess the status of the company and its strategy on an ongoing basis.”

“It is difficult to provide an indication of a final dividend. This will depend on the value at which the remaining assets are sold, as mentioned, the timing thereof, and the applicable fees payable on the transactions,” he explains.