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The emergence of Value Capital Partners (VCP) as an influential shareholder at Grand Parade Investments (GPI) is not surprising. In the past few weeks it has snapped up most available GPI scrip to build a useful 16.6% stake.
It’s not like VCP is unfamiliar with key assets in GPI’S portfolio. Earlier this year it underwrote Sun International’s R1.5bn rights issue. While much of the focus at GPI is on its efforts to find a profit recipe for Burger King, its most tangible store of value is its minority holdings in Grandwest Casino in Cape Town, Golden Valley Casino in Worcester and highly profitable limited-payoutmachine company Sunslots. All three of these are controlled by Sun International. So far VCP has not shown its hand at GPI. I wonder if, perhaps along with other activist shareholders, it might be keen to push a restructuring at GPI that would separate the gaming investments from the food segment. The gaming investments represent a compelling bundle for investors keen on regular dividends, and for assets highly leveraged to an economic recovery.
The food segment would be more difficult — without the dividend flows from the gaming assets, funding for rollouts of Burger King outlets could be a problem. Then again, if a new and deep-pocketed strategic partner — perhaps Burger King Europe — could be brought in as a major equity partner,
GPI shareholders might be satisfied with holding a smaller stake in a better-managed and profitable fast-food enterprise.
I note VCP secured board representation at Sun International not long after underwriting the rights offer. Let’s see if the same happens at GPI, where, significantly, VCP’S participation has already been welcomed by an executive director.
Hook, line and sinker
My story on Abagold (in this edition) might make commentary in fishing giant Oceana’s annual report more relevant. Oceana argues that the expected increase in demand for fish and the largely static wild-capture rates point to substantial growth in global aquaculture. The group notes recent projections forecast production growth of 37% by 2030 over 2016 levels.
This should be a boon for Oceana’s existing fishmeal and fish oil businesses. But it also reaffirms a willingness to drop lines for “carefully targeted acquisition in the aquaculture sector”.
Clear dividend signal
The share price of Telemasters is up around 130% so far this year to 115c.
That should cause ringing in the ears for punters who have continued to prefer its more illustrious telecoms sector countermates. Over the past three years the company’s share has on occasion plunged precipitously — touching levels below 30c.
The concern has mostly been whether Telemasters would continue its policy of paying out quarterly dividends. New faith in Telemasters seems to stem from a stronger financial position with net cash flows from operations a more reassuring R17m (around 40c a share) for the year to end-june. The company also holds cash on hand of R11m (26c a share). I confirmed with founder Mario Pretorius that since listing in 2007, Telemasters has returned R35m in dividends. That is equivalent to around 78c a share — not a shabby return over 10 years for original investors who took scrip at 50c a share. It’s still easy to dismiss Telemasters as unadventurous … at least in comparison with the strategic stretches made by larger rivals like Blue Label and Huge. Then again, it’s worth remembering that some of the most enduring businesses from the late-1980s listing boom — CMH, Spur, Bowler Metcalf and Nu-world — held a singular operational focus, shied away from corporate activity and guarded very conservative balance sheets. Tightly held Telemasters could easily ring up more gains in 2019 if the halfyear to end-december results show sustainable profit signals.
VCP might be keen to push a restructuring at GPI that would separate the gaming investments from the food segment