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Share price: 616c JSE code: GPL

HOLD GRAND PA­RADE IN­VEST­MENTS HAS shifted from a gam­ing-aligned in­vest­ment com­pany to a spe­cialised counter with an in­tense fo­cus on the food sec­tor via own­er­ship of the Burger King mas­ter fran­chise, a 10% stake in JSE-listed Spur Corp and food sup­port ser­vices. GPL is no longer a value play, but sen­ti­ment hinges on just how quickly and prof­itably the com­pany can roll out Burger King out­lets. GPL has al­ready slowed the slug­gish ex­pan­sion of Burger King in the short term (it still in­tends open­ing 250 stores in the medium term) in a bid to make ab­so­lutely sure the oper­at­ing mar­gins are fat enough.

The mar­gin en­hance­ment ef­fort is be­ing helped by a slight re­vis­ing of the ex­pan­sion plans to in­cor­po­rate more “drive-thru” out­lets. From what can be gar­nered from the fledg­ling chain of Burger King stores is that mar­gins of al­most 60% are not un­rea­son­able, es­pe­cially since GPL has cut over­head costs by lo­cal­is­ing much of the food prepa­ra­tion process.

Per­haps the more in­trigu­ing con­sid­er­a­tion is how long it will take for GPL to shift closer to Spur (or vice versa), a de­vel­op­ment that could hold huge syn­er­gies for Burger King in pro­cure­ment, mar­ket­ing and dis­tri­bu­tion. At the mo­ment it seems Spur and GPL are po­litely in­ter­act­ing (GPL CEO Alan Keet now serves on the Spur board), and it may still be some time be­fore there is a com­mit­ment to re­in­forc­ing the re­la­tion­ship. There’s clearly a lot swirling around on GPL’s plate, which prob­a­bly makes the share a hold at this point.

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