Free burgers

Investors may relish taking advantage of the Burger King induced discount on GPI

Iconic fast-food brand Burger King, it could be argued, is not getting a royal rating from local investors. The local Burger King franchise is 91% owned by empowerment company Grand Parade Investments (GPI), which has rolled out nearly 70 stores countrywide.

Admittedly, prevailing sentiment for big international eatery brands being rolled out in SA looks a little queasy. Taste Holdings is still looking some way off making sumptuous profits from pizza brand Domino’s and coffee-shop brand Starbucks.

Burger King is not yet also churning out profits, and GPI executives suggest real profitability will be apparent only in the year to end-June 2017. The store rollout has been lower than expected, but early indications are that margins will be relatively fat (somewhere between 55% and 60%) after a number of key inputs were “localised”.

While GPI’s prospects are firmly hitched to Burger King, the actual valuation breakdown at the company may surprise a few punters.

As at the end of June, GPI’s remaining Sun Internationalaligned gaming investments — a 15.1% stake in the GrandWest casino in Cape Town, 15.1% of the Worcester casino and a 30% stake in limited payout machine (LPM) operator GrandSlots — were collectively valued at R1.4bn. I’d venture to say this valuation is solid, considering that we can gauge the performance of individual casinos in Sun International’s results, and the LPM valuation is referenced by recent transactions that led to GPI selling control of GrandSlots to Sun International.

The gaming investments are worth around 300c/share to GPI shareholders. But then you can also factor in the R562m due to GPI — in monthly instalments over the next three years — from Tsogo Sun, in exchange for