Tokes, smokes and Steers

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