Two stocks to terrify you
As a teenager I delighted in horror movies. Growing up in the stifling atmosphere of a small town in the Eastern Cape might do that to a person. I saw Christine (based on a Stephen King novel about a vengeful car) at the Walmer drive-in, but was probably more petrified when the Ford Cortina contingent rushed for the exit after the double feature ended.
During my school days we pretty much saw every B-grade horror flick — from What’s in the Basket? and Tourist Trap to Phantasm and Patrick —though I like to think there was an erudite quality to the David Cronenberg movies as well as devilishly deep layers to The Exorcist, Angel Heart, Night of the Living Dead and The Wicker Man (the early 1970s original, not the awful remake).
In truth, the really scary part was that video store owner Mr Gajjar always allowed us to load up those giant Betamax video machines into a hiking rucksack, hop on our tiny 50cc motorbikes and whizz off to someone’s house for an all-night viewing session.
These days I can’t handle the horror genre. On my kids’ incessant urging I somehow got through the claustrophobic Rec, but for the main I can’t make it past the first jump scare any more.
As an investor, and I suppose this is inevitable as one creeps nearer to retirement age, I try avoiding scary situations. And if I do work up the nerve, it’s like watching a horror movie ... the first jump scare and I’m out of there.
While I probably made my best-ever return as an investor from dabbling in African Bank preference shares literally minutes before being suspended, I have not had the guts to sit out scary scenes in Steinhoff, EOH, Blue Label Telecoms, Tongaat Hulett (just as well, it seems) and, I hate to say it, Sasol (where I will be haunted forever after taking “profit” at around R120). I am still peeking nervously through my fingers — watching two horror shows unfold.
One is Premier Fishing & Brands, where every normal investor has been scared off by a collapse in export markets for lobster and abalone as well as some nerve rattling efforts by some local banks to shut off the company’s banking facilities. Premier is part of the Sekunjalo-controlled AEEI stable, which also owns controversial technology conglomerate Ayo. Sentiment has never been anything but sheet scared.
Choppies waters
The other is small Botswana-based retailer Choppies, which has been to hell and back over the past few years with an auditing controversy slashing away any goodwill the company previously had in the market. The last set of results showed Choppies’ current assets of R733m dwarfed by current liabilities of R1.1bn. There is R741m in trade and other payables alone. So why am I willing to be spooked?
Firstly, these are flutters to relieve the boredom of my stalwart deep value positions. Specifically, in the case of Premier, I know they part-own a very good squid business, which they bought at a great price. That squid business, by my reckoning, is worth far more than Premier’s current market value, and now the fishing rights allocation process is complete, some parts of Premier could be takeover targets.
The group has also invested heavily in its abalone farm in Gansbaai, and — as results from other large fishing companies show — that market is on the mend. Though a company failing the asset test would be anathema to me, I can’t imagine Choppies key directors and prime movers Ramachandran Ottapathu and Farouk Ismail would be regularly buying shares over the past year if they were not confident of rebuilding the group’s brittle capital structure.
Operationally, the business is not half bad. Revenue for the six months to end-December was P3.2bn with net profit of P108m, or 8c a share. Net cash generated from operations was a decent P290m. Like all horror movies, things don’t always seem as scary in the light of day. But here, we are just past midnight. I hope my nerve holds.
I am peeking through my fingers watching two horror shows unfold. One is Premier Fishing, the other, Choppies