Seven Group Holdings Ltd (ASX: SVW), not to be confused with Seven West Media Ltd (ASX: SWM), must be one of the least understood companies on the ASX. I started to summarise the company's operations but the group's website does a fantastic job: Seven Group Holdings (SGH) "is a leading Australian diversified operating and investment group with market leading businesses and investments in industrial services and media. In industrial services, WesTrac Group is the sole authorised Caterpillar dealer in Western Australia, New South Wales and the Australian Capital Territory in Australia, and in North Eastern China territories. SGH Energy is developing an expanding presence in oil and gas projects in Australia and the United States.
SGH also has a 45 per cent shareholding in Coates Hire, Australia's largest equipment hire business. In media, SGH has a 35.3 per cent shareholding (and additional convertible interest) in Seven West Media, Australia's largest multiple platform media company, including the Seven Network, West Australian Newspapers, Pacific Magazines, Presto and Yahoo!7."
High Risk
I doubt there are many higher risk investment vehicles on the ASX at the moment. Under the management of retiring CEO Don Voelte, Seven Group sought to take advantage of weaknesses in the oil and gas market by purchasing a number of energy assets in 2014. The purchases, which included a $100 million investment in Woodside Petroleum Limited (ASX: WPL) shares, the purchase of ex-ASX listed Nexus Energy for $180 million, and the purchase of oil exploration tenements in Texas, were considered speculative at best at the time.
The market view was that Don knew what he was doing, seeing as he is was the former managing director of Woodside and chairman of Nexus, however the investments remain high risk as the oil price again dips below US$50 per barrel.
To make matters worse, the group's caterpillar dealership network is stuck in the firm grasp of the downturn in mining capital expenditure, and the major investment in Seven Network has fallen in value by over 50% in the last 12 months.
Versus High Reward
Like investing in any assets that are out of favour, there's the chance that Seven's portfolio of investments could quickly turn around. China could release a massive stimulus package, boosting demand for Caterpillar products, the oil market could stabilise at a more sustainable level in the near term, and Seven network could come up with some ripper TV shows this year. Any of these scenarios would be beneficial to Seven Group's share price, which is sitting about 30% below its 12-month high.
The likelihood of this scenario I place at the lower end of the scale and the man behind the magic, Don Voelte, will retire on 31 August, to be replaced by current chief operating officer Ryan Stokes.
