Consensus community valuation
Scroll down. Earliest stuff is at the top. Most recent stuff is at the bottom.
SOL provides exposure to the obvious businesses like BKW, API, NHC & TPG (formerly TPM), but there are plenty of lesser known investments that will give SOL a kick-along over the next few years, like their Pengana holding (PCG), their mining assets (CopperChem, etc), their commercial real estate assets, and their investments in start-ups and disruptors. There are the obvious catalysts (like a TPG Telecom rebound) and then there are the less obvious catalysts. They will likely always raise their dividend every single year, through good times and also in the not-so-good years, because they can - they have the reserves to do so - and the track record of doing so - and they have stated that they will (and that their dividends are funded from cashflow, not from profits). They will also continue to grow their various business units and business interests, and their SP will continue to track higher over time. Not in a straight line, mind you, but over time, they will keep growing.
The sooner they offload NHC (New Hope Coal), the better, because thermal/energy coal mining is going to become more and more universally hated as time goes on, and companies that derive 25% or more of their income from thermal coal assets are going to be punished (sold down) by the market. BlackRock, the largest fund manager in the world, with over $10 trillion in FUM (yep, that's trillion with a "T") have recently announced that they're removing all such companies (25% or more of revenue derived from thermal/energy coal) from their managed / discretionary accounts. This won't affect most of their index-based ETFs but they are developing new ETFs that don't include such companies. Other large fund managers will follow BlackRock's lead. Regardless of an individual's own opinion on whether climate change exists or is indeed influenced by us (humans) to any great extent (and the science is overwhelmingly of the opinion that we have caused significant climate change and will continue to do - and that we urgently need to take radical steps now to repair the damage we have done and to stop the situation from deteriorating further) the facts are that climate-change now means investment risk (polluters and those seen as responsible for negative climate change either by polluting or providing the means to pollute will be sold down - as will the thermal/energy coal price) and fund managers would be doing a disservice to their clients if they ignore that risk. SOL derives less than 25% of their income from NHC, or at least they will this year - and likely for the foreseeable future, but it's still a turn-off for many investors.
Another turn-off for some is the cross-ownership structure between SOL & BKW (Brickworks) which means that nobody can take over either company without both companies agreeing - which they would be unlikely to do. It also allows the Millner family to control both companies with a relatively small ownership percentage (under 10% last time I checked). However, putting all that aside, SOL is one of the last of the real diversified conglomerate companies available on our market, where there is a track record of solid investment performance, by long-term shareholders who are prepared to back good businesses (like TPG Telecom) for decades and reap the rewards of those investments over many years, while paying an increasing stream of dividends to their shareholders. I hold them in both my main portfolio and in my super.
08-Sep-2020: I no longer own any SOL, as I have explained in my "Risks" straw. I think that Millner's reluctance to divest their 51% of NHC is not doing the company any favours, and nor is his attitude to climate change and investment risk. I still admire what he has achieved with SOL over the decades, but I don't hold SOL shares any more. I would now rather pick and choose which of their (SOL's) holdings (such as TPG) I want to hold personally, and then buy those shares directly. And I do not want to hold NHC.
09-Mar-2021: Update: Price Target of $33.50, based on momentum mostly. IV (intrinsic value) is well south of that I reckon. Not holding.
07-Sep-2021: UPDATE: New 2-year PT of $39, so by September 2023. Not much to add, as I've covered off SOL already either above or in various straws. They are like a PE (private equity) mob, and are virtually immune from being taken over due to the BKW/SOL cross-shareholdings, which could never happen now, but it seems also can't be unwound in the case of Soul Patts and Brickworks. The main reason I'm no longer a shareholder is simply their 39.85% stake in NHC (New Hope Coal). SOL/BKW DID hold 49.9% but sold down (or were diluted by a CR - I haven't checked) in December (2020) and June/July (2021) and are now at just under 40%, but it's thermal/energy coal, and I'm not keen to hold NHC shares, even indirectly. That said, NHC closed today at $2.29, so their SP has doubled in 4 months (they were $1.145 on May 12th). SOL have done pretty well over the past year also - closing at $36.20 this afternoon, some 72.7% higher than their closing price one year ago (of $20.96). They look expensive up here to me, but I daresay they're going to go on and get even more expensive.
SOL's outperformance this past year comes despite one of their main holdings having a poor year. SOL own 12.6% of TPG Telecom (TPG) which is down for the year, particularly since David Teoh left the business - with zero notice. 12.6% might not seem like much, however that's 12.6% of a $12.272 billion company, so SOL's stake in TPG has a current market value of $1.55 billion, and SOL itself has a market cap of $8.47 billion, so TPG accounts for 18.3% of SOL's m/cap. NHC's m/cap is $1.88 billion, so SOL's 39.85% of NHC is worth $749m (or $0.75 billion), half of the value of their TPG holding.
Of course, SOL's biggest investment is their 45.4% stake in Brickworks (BKW), which is worth $5.57 billion (BKW's m/cap is currently $12.27 billion), however BKW own 39.4% of SOL, so that gets a bit tricky...
06-Dec-2022: Update: I'll revert back to my earlier price target for SOL of $33.50. They have positive momentum but I think $39 is going to take a bit longer than I had anticipated back in September 2021. Let's say $33.50 by December 2023.
I don't hold them. Have done previously. I would like them a lot more if they didn't hold such a large stake (39.9% currently) in NHC. I prefer Brickworks, but BKW's largest investment is their 26% of SOL. What a tangled web they have woven.
I came across an interesting article about that, and why SOL tends to trade much closer to their underlying NTA than BKW does - see here: https://www.afr.com/chanticleer/retail-investors-explain-soul-patts-and-brickworks-value-gap-20180920-h15mh4
I'll post a bit more about that in a BKW straw I reckon...
This is how the two used to look a few years back:
The numbers have mostly changed since then.
Here is SOL in July 2019:
Source: https://strongmoneyaustralia.com/lic-review-whsp-soul-pattinson-asx-sol/
Here's what they looked like in January this year:
But there's also this:
And don't forget this:
Since then they've sold Round Oak Minerals to Aeris Resources (ASX: AIS) however SOL own 30.32% of Aeris Resources (AIS).
And here's something that many people may not be aware of...
And then there's this:
And let's not forget their Property portfolio:
This is the final slide from their Half Year Results Presentation in January 2022:
So negative working capital, but not much debt for a company of their size, a fair chunk of that debt offset by their $166m cash balance at the time, plus their average borrowing cost was just 0.72% p.a. and their return on investment would have been a good deal higher than that methinks.
And sure, we might not be too surprised that SOL have decent investments in blue chips like BHP, WOW, CSL, MQG, TCL and WES, plus some APE (Eagers Automotive) and ALQ (ALS), but I don't think too many of us knew that SOL had investments in all of these smaller companies:
Source: https://www.whsp.com.au/wp-content/uploads/2022/06/WHSP-results-half-year-FY2022.pdf