Sanlam Investment Management’s Small Cap Fund is betting on specialised packaging group Bowler Metcalf, private education provider Curro Holdings and gambling business Grand Parade Investments for returns.
The fund, the s e c o n d- b e s t performer in its peer group over the past year according to Morningstar Research, is bullish on Bowler’s venture into soft drinks, according to Vanessa van Vuuren, manager of the fund. The fund returned 16.2% over the past 12 months and 17% over the past three years on an annualised basis.
Bowler’s soft drinks unit, Quality Beverages, which produces the Jive brand of cold drinks popular in the Western Cape, will be merged with MIH Holdings’ Shorel i ne unit, which produces the Coo-ee brand in KwaZulu-Natal, to form a new company called SoftBev. Bowler will hold 42% of this new company. The stock returned 11.8% over the past year.
“The t wo companies will emerge as a strong national soft-drink player, wit h t he Gauteng market being the big opportunity for them to tap into,” Van Vuuren said. “The Bowler management team have been prudent capital allocators and I believe that this recent deal will create significant value for Bowler shareholders over the medium to long term.”
The fund bought into Grand Parade Investments at the beginning of the year as the company entrenched its focus on gaming and food in South Africa, Van Vuuren said. The stock returned 75.2% over the past year.
The fast-food and quick-ser vice restaurant industry is a resilient sector of the economy with decent growth prospects and its Burger King investment is yielding strong results and a great uptake of its product, Van Vuuren said. The company is also bidding for SA’s third national lottery concession.
Grand Parade’s planned sale of its stakes in Grand West and Worcester’s casino, to Tsogo Sun, and a stake in its limited-payout machine business to Sun International, will leave the company with a “formidable cash pile” to pursue new ventures, she said. This will probably happen in the fast-food value chain, according to her.
“Should t hey not f i nd t he right investments, they have been known to pay out decent special dividends,” Van Vuuren said.
Zeder, the agriculture investment holding company, and Curro, which operates private schools, are both among the fund’s top-10 stock picks, according to its latest fact sheet. Zeder returned 43.5% over the past year and Curro 28.4%.
Zeder’s underlying assets, which include a stake in Pioneer Foods, chicken producer Quantum Foods and Zambian producer Chayton, operate in sectors where the demand for their products will grow, according to Van Vuuren.
“I view Zeder and its underlying portfolio as a long-term investment and do not see it as a share that will yield short-term quick wins,” she said.
With regard to Curro, she said that the demand for private schooling in SA is a “secular growth story” that has “significant momentum” and this will continue for many years. The company saw the number of students enrolled at its schools jump 32% to 28 899 in the six months ended June compared with a year earlier.