How to win at roulette

Financial Mail - - MARKET WATCH - @mar­chasen­fuss by Marc Hasen­fuss

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

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