Tokes, smokes and Steers

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

Plague di­ary — week 14: Af­ter per­pet­ual ba­boon raids dur­ing the early parts of the Covid-19 lock­down, there ap­pears, fi­nally, to be an un­of­fi­cial truce. Maybe this only holds true in my neck of the woods, but I can hap­pily re­port that our sparse veg­gie patch has not been vi­o­lated for weeks. In­stead, the ba­boons pro­ceed in dis­ci­plined fash­ion down Light­house Road, no longer veer­ing into the gar­den for skir­mishes with our Jack Rus­sells.

I might now be pre­pared to risk a small to­bacco plan­ta­tion — which would be pru­dent since cig­a­rette sales are most un­likely in the near term in our won­der­ful nanny state. My mother is down to her last six boxes of Dun­hills, which means an­other fort­night and she’ll have to be blaz­ing rogue.

While we are blow­ing smoke, I might men­tion the head rush caused by cannabis busi­ness La­bat’s share price surge last week. I had a small stake that I had in­tended to stoke up. But the un­ex­pected 60%-plus gain was duly bank(i)ed.

La­bat’s shares had been firm­ing ahead of an an­nounce­ment that it had placed new shares for cash with Ver­i­ty­hurst, a self-con­fessed “spe­cial­ist and yet very con­trar­ian money man­ager that only fo­cuses on bal­ance-sheet in­vest­ing”. I must say, Ver­i­ty­hurst has a most ec­cen­tric port­fo­lio — rang­ing from Pem­bury, Stein­hoff and Vis­ual In­ter­na­tional to Arc Cap­i­tal and DRD Gold.

For the life of me, I could not dis­cover who the di­rec­tors are, de­spite the web­site dis­play­ing tabs for “board of di­rec­tors”, “lead­er­ship”, “man­age­ment” and “team”.

For La­bat, which is try­ing to raise R112m in a lan­guid book­build, the de­vel­op­ment is crit­i­cal for its am­bi­tions. Ver­i­ty­hurst will ini­tially take 40-mil­lion shares at 50c a share, and then in Au­gust con­sider an­other 30-mil­lion tranche at 100c a share. In any event, I used some of the La­bat pro­ceeds to buy a few shares in Fa­mous Brands — owner of Steers, Wimpy and De­bonairs Pizza (to name a few).

I ended up at Steers in Fish Hoek late last Wed­nes­day af­ter a par­tic­u­larly gru­elling game of ten­nis and sub­se­quent “strat­egy un­pack­ing” ses­sion. It was my first fast-food meal in more than 100 days. The in­dul­gence, es­pe­cially the over­sized packet of chips, was de­li­ciously ir­re­spon­si­ble for a man who has bat­tled valiantly to re­main un­der 90kg.

Why am I so hun­gry?

But it re­minded me how es­sen­tial fast foods are, and that a gar­gan­tuan en­ter­prise like Fa­mous Brands will re­main a much-fre­quented fix­ture. Some might ar­gue there is a kind of stoner logic here as I shift in­ter­est from pur­vey­ors of the “devil’s let­tuce” to ven­dors of ham­burg­ers and pizza. Let’s rather say I like to in­vest in busi­nesses with habit­form­ing brands and ser­vices.

Speak­ing of shifts, I was rather sur­prised to see se­cu­rity gi­ant Fidelity ADT snag­ging some guard­ing busi­nesses from be­lea­guered ser­vices group CSG Hold­ings.

I would have thought CSG’S as­sem­blage of mom-and-pop se­cu­rity op­er­a­tions might be some­what ir­rel­e­vant to Fidelity ADT. Frankly I can’t see a smaller CSG re­main­ing on the JSE, and would bet on an op­por­tunis­tic delist­ing sooner rather than later.

On pa­per, the share looks cheap, and the best way to un­lock value ef­fi­ciently might be away from the pub­lic gaze.

That said, I won­der if Fidelity ADT — headed by for­mer Spring­bok flanker Wahl Bart­mann — would con­sider lock­ing in a JSE list­ing? Ad­mit­tedly it’s not the great­est time to bring a busi­ness to the bourse, but se­cu­rity (un­for­tu­nately) is one of the few vi­brant niches in this dour econ­omy.

The JSE had a few se­cu­rity list­ings in the late 1990s but all were taken pri­vate in a rapid con­sol­i­da­tion process. Some were re­ally in­ter­est­ing — for ex­am­ple Gray Se­cu­rity and Paramed. Oth­ers, such as the hap­less Com­mand Hold­ings, were a com­plete catas­tro­phe.

My mother is down to her last six boxes of Dun­hills, which means an­other fort­night and she’ll have to be blaz­ing rogue

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