Raise a glass to Joffe

The market remains in two minds around deal-making doyen Brian Joffe’s new investment vehicle Long4life — at least judging from the iffy share price over the past six months. Things could change quickly if Joffe snags a big deal to supplement the initial Holdsport transaction. Of course, with vendors of “lifestyle” assets no longer able to reference the JSE for demanding earnings multiples, street-smart Joffe knows that cash-flush Long4life can afford to bide its time. But if anyone doubts Joffe’s ability to acquire and incorporate assets outside his old Bidvest stomping ground, they should have a look at the initial successes notched up in Long4life beverages segment. Recently acquired specialist beverage businesses Chill and Inhle reported volumes up a fizzy 21% and revenue higher by 21%. Most encouraging is that the beverages segment’s own brands — Score Energy and Fitch & Leedes — recorded pleasing growth.

Long4life has made significant investments in upgrades and enhancements to facilities infrastructure, increasing capacity and improving capability. Joffe notes that the timing of these facility upgrades is advantageous as peak trading and capacity utilisation are traditionally weighted to the second half in the summer months. You can bank on Joffe ensuring further operational and logistical efficiencies, which, coupled with ongoing market share gains, mean that the beverages segment should be pouring some decent profits this financial year. I wonder whether Distell might be paying Joffe a friendly visit before Long4life beverages segment decides to shift into alcoholic brands.

Nu-world sins

Nu-world, probably best known for domestic appliances and white goods brands, is fortifying its presence in the “sin sector”.

It already markets niche liquor brands and appears to be expanding this mainly upmarket whisky offering into trendy gin brands.

But commentary accompanying the group’s solid results for the year to endaugust showed its fast-moving consumer goods (FMCG) division also making an unexpected shift into tobacco. This entails the marketing of “locally manufactured, exclusively designed cigarettes” with flavouring options, under the brand Ultimum. Nu-world’s segmental reporting revolves around geographic disclosures, but if the FMCG division continues to expand, shareholders will clamour for a divisional breakdown as well. I would be interested to gauge the revenue numbers and the margin for the “sin” brands.

Steep (l)earning curve

Stadio has not enjoyed the same early euphoria as Curro. It peaked at over 800c early this year but has been marked down to under 400c.

Curro, on the other hand, had unwavering support in its formative years, though the share price has weakened markedly this year as the market reassesses the justification for a very demanding earnings multiple.

Stadio is headed by former Curro CEO Chris van der Merwe, who knows a thing or two about rapidly rolling out private education. Still, last Friday, the market barely registered Stadio’s latest acquisition — Prestige Academy. Prestige offers 27 registered qualifications at its Bellville campus and four at its Centurion campus. Stadio now owns six registered higher education institutions, and the first moves have been made to start its “multiversity” campus in Durbanville. So, does Stadio offer value at current levels? It seems certain that the projected 5.1c a share for the 2018 financial year will be easily exceeded.

Even if we assume Stadio makes its 2019 forecast earnings of 8.5c a share this financial year, the forward earnings multiple is still a demanding 45.

I suspect if rival Advtech believed this was a sustainable market rating it would be hastily making plans to spin off its well-established and smartly profitable tertiary education hub.

Curro had unwavering support in its formative years, though the share price has weakened markedly this year