We don’t need another zero
The days darken. A regular reader was much perplexed about the weakness in Merafe Resources, a firm favourite with small-cap punters. The company has pretty much everything going in its favour — rand weakness, a firm chrome price and decent dividend prospects. What is the market missing?
I think a gloom is setting in that is discounting even redoubtable shares that fall into the South Africa Inc category. You might finally be reassured about holding onto those Reinet shares. Then again, I look at the lack of market appreciation for Super Group and Argent Industrial, both of which have significant and profitable businesses offshore.
Yes, local companies have a heap of problems to surmount. Astral Foods made that very plain — and perhaps more companies should be candid about these challenges. Give a frank and brutal account. Sentiment is already at rock bottom anyway. And perhaps the penny will finally drop for the government. That’s probably wishful thinking — ideology takes priority over common sense.
I remember a particularly dark patch at Rhodes University in the mid-1980s. I had been roped in to play goalie for the residence soccer team. We were on a terrible losing streak; we took a 6-0 walloping against Protea United. Respite came from Klerksdorp in the form of our skipper — known fondly as Hacker or Bok (both monikers referencing his lethal tackles).
Bok now resides as a reluctant sophisticate in Switzerland. Back in the day, though, a violent bar brawl at the Vic hotel in the erstwhile Grahamstown caused serious damage to his larynx. So for several years Bok’s voice pitched somewhere between Tom Waits and a soprano who chain-smoked Gauloises.
We speculated that this handicap was the reason he could not always articulate effectively. On the football field, he would bark bizarre commands as we hacked our way through the Grahamstown league fixtures. Our midfield was once instructed to “fazzle them” and, more famously, “you going to get chowed in there, you mothers”.
Bok had a habit of singing in the mirror as he brushed his legendary mullet into shape, mangling the big hits of the day. Van Halen’s Panama would be belted out as “enema”. The changes to Rock Me Amadeus by Falco can’t be repeated in a family magazine.
But our results improved after someone claimed to have heard Bok twisting Tina Turner’s We Don’t Need Another Hero into a cruelly motivational “we don’t need another zero”. Following this “Turneround”, we recovered to finish a respectable third on the table.
Taking off the edge
Speaking of pep talks to the bruised and battered, I enjoyed the repartee at the interim presentation of Quantum Foods, which is not everyone’s favourite cyclical stock. The group’s poultry and animal feeds segments traded in the black in tough conditions, but the egg business fried the bottom line with a sizeable loss.
Then there was the recently disclosed outbreak of avian flu at a layer farm in the Western Cape to add to Quantum’s woes. The group now has an R85m overdraft and has skipped the interim dividend.
Question time was most interesting with Hamish Rudland, representing major shareholder Braemar, weighing in with polite — though pointed — questions on Quantum’s egg business and the small but loss-making African operations.
The egg business, thankfully, should benefit from improved supply-demand dynamics in the second half, but I would not count my chickens just yet.
A representative of Country Bird Holdings (CBH), which built a large position in Quantum before selling most of this stake to Braemar in mid-2021, was less diplomatic.
He kicked off with a complaint that CBH was battling to get a meeting with Quantum’s top executives. CEO Hennie Lourens responded that executives did not meet separately with individual shareholders. Other major Quantum shareholders — private equity group Silverlands and Astral Foods — did not pose questions, which could be interpreted in many ways.
Quantum’s “hard” NAV is close to R10 a share. That’s a hefty discount on a business that has shown it can wing it and swing it … but hopefully not sling it to remaining minority shareholders by pitching a buyout offer and delisting.
I’d be hoping anchor shareholder Silverlands — which is also a major shareholder at the Crookes Brothers agribusiness — would shepherd new operational assets towards Quantum, just to take off that cyclical edge. Maybe Braemar has some ideas, too?