Value is the right word for these partners

Changes could start coming through fast at Grand Parade Investments (GPI), where some shareholders have long been frustrated by the wide discount applied to the underlying assets.

It was apparent last year already — when board changes were initiated by a group of significant-minority shareholders — that GPI needed to deal more decisively with its underperforming operations.

GPI recently opted to place loss-making fast-food ventures Dunkin’ and Baskin-Robbins into liquidation. That was not material to unlocking value, but it did signal that executives were willing to grasp the nettle to ensure cash leaks were stanched and that management was not distracted by noncore issues.

A far more critical development is the recent sell-down in

founder and executive chair Hassen Adams’s shareholding. This was coupled with the emergence of the highly regarded Value Capital Partners (VCP) as the new shareholder of reference … or influence, if you will.

At the time of writing Adams still held 9.35% of GPI’s issued shares, but VCP was in a far more commanding position with 20.88%.

It seems reasonable to argue that there has been a corporate coup.

Adams played a key role in building up GPI over the decades — including fending off hostile advances and holding his ground at the old Real Africa Holdings to the benefit of shareholders.

But he might have taken shareholder criticism around GPI too personally.

The emergence of VCP as a leading shareholder in GPI

coincides with strong results from technology conglomerate Altron, in whose turnaround VCP has been the prime mover. There will be hopes it can replicate this success at GPI.

Clearly there is much more to do at GPI than close two small fast-food brands. The big question is whether GPI will continue its operational role at Burger King — which has still not turned a profit despite building a chain of about 90 stores countrywide.

It seems the sensible option for GPI is to find an investor with credentials as a fast-food brand operator to acquire a majority stake.

A possible compromise could be GPI reverting to its role as an empowerment investment company by retaining a significant minority stake in Burger King — which would stand as a portfolio investment alongside dividend-spewing investments in SunWest (owner of GrandWest casino in Cape Town), Sun Slots (the limitedpayout-machine gaming specialist) and restaurant franchiser Spur Corp.

GPI’s investor presentation for the half-year to endDecember focuses on the turnaround effort at Burger King — suggesting that executives believe this is the best way to build value for shareholders. There are a fair number of challenges for Burger King — load-shedding, securing sites with suitable rentals and fending off competition in a market where discretionary spending is shrinking.

With GPI’s gaming assets producing reassuring returns, perhaps there is willingness to extend Burger King some leeway in finding those evasive profits. If the chain is given a chance to capitalise further on a number of operational improvements shown in the interim period, then proactive value-unlocking may be focused on other areas, such as selling off GPI’s head office in the centre of Cape Town.

The market has already warmed to the emergence of VPC as the leading shareholder in GPI, with the shares up close to 20% in April (at the time of writing). IM believes there could be more upside as VCP starts showing its hand.