Hemingway would approve. Two Saturdays ago, I did not, for an instant, shirk my muscle-bound son’s challenge to arm wrestle. Of course, it was more than an arm wrestle. The mantle of alpha male was up for grabs — pretenders to the throne sense weakness as my household role ebbs into that of the old man and the settee.
In truth, I was feeling fairly invincible, having just returned from a league tennis event at which I had beaten both opponents and a fast-encroaching rain squall. Blessed with an ability to lock my arm, I reckoned there was a chance to tire out my son and settle for a draw.
My 50-something arm held stoically, for about 30 seconds, then there was light pop and I gave way. The cheers from the rest of the family were most disconcerting, though I’ve heard the same schadenfreude when I’ve been beaten at table tennis, outmanoeuvred in chess or edged in the Slangkop trail run (to cite a few defeats).
That deep emotional hurt probably masked the throbbing pain in my bicep. The next morning the arm was tender, but nothing as excruciating as being a diehard shareholder in Brait. I did the usual early morning stoop to lift Dexter, the rotund Jack Russell/mastiff cross, off the duvet. That simple movement induced a crisp crack that echoed around the bedroom. Dexter cringed and bolted.
Alarming as that loud snap was, I was still in no real pain. I assumed a mere reset of a joint that had been put out by the arm wrestle. But when brushing the old tombstones, I noticed in the bathroom mirror that my bicep was bulging conspicuously. Think Popeye after he has guzzled a tin of spinach.
Turns out I’ve snapped the tendons above my bicep. This causes the bicep to bunch, quite hideously. And so, the Popeye predicament: go under the knife or say farewell to arms, and live with this physical oddity? I opted for the latter.
I’m happy to report that, so far, it has hardly affected my tennis. My backhand is around 35% off its best and my serve is probably down 15% in power. But my forehand seems smoother and my drop shots have ever so slightly been enhanced.
Speaking of flexing muscles (and perhaps tinned spinach too), the trading update from food brands group RFG Holdings shows the wholesome benefit of smart capital expenditure on production efficiencies in the past years. There was a time not too long ago that the market doubted RFG would eke appetising returns out of its heavy capex investment.
In May last year, the share went as low as 751c — with all kinds of nasty conjecture about RFG being a takeover target or, worse, a candidate for delisting. Some cynics may question the sharp recovery in the share price — even if it’s still well off the R18 levels seen five years ago.
It’s well justified for a strategy well played. There is much encouragement to be taken from the five months to end-February trading statement
I think it’s well justified for a strategy well played. There is much encouragement to be taken from the trading statement for the five months to end-February, which confirms steady revenue growth driven by price inflation of 7.9% (with the group continuing to recover higher input costs). This was achieved notwithstanding load-shedding, pressure on consumers and the problems at ports that choke RFG’s exports. The trading statement suggests margins have largely been sustained, which will make the interim numbers — due in May — very interesting reading.
Despite frustrating port congestion, RFG says demand from foreign customers remains good. Hopefully this will persist long enough for RFG to capitalise on the recent investment in upgraded and new equipment at its fruit products factory in Tulbagh, which accounts for the vast bulk of the group’s exports. The fact that this year’s crop yielded high-quality fruit should get shareholders drooling over a sumptuous full-year dividend.
My parting shot is about private education stocks. My spirited colleague The Finance Ghost has dedicated his column to this asset class. I, too, recall the head-spinning earnings multiples accorded to Curro as it embarked on its rapid rollout of schools. It was as if Curro was about to break into the hallowed southern suburbs school belt in Cape Town.
Older readers may also recall Curro’s audacious 2015 hostile takeover bid for AdvTech, its larger rival in operational terms. It took a Herculean effort by the then AdvTech CEO Frank Thompson to fend off Curro (which had the muscle of PSG behind it). Takeover tilts — especially those that are thwarted — tend to bring out the best in the target company (think Standard Bank in the late 1990s after an overconfident Nedbank advanced).
AdvTech was no different, and almost immediately began to chalk up significant gains with a more determined expansion strategy (even taking on Curro in its own affordable schools turf).
I’m just being mischievous here, but it would be supremely ironic if AdvTech (market value almost R16bn) took a shot at Curro (market value R6.5bn). Far-fetched, I know. But then, who expected gaming group Sun International — which had just culled its debt to more reasonable levels — to pounce on unlisted rival Peermont?
Interestingly, Sun and AdvTech share a common influential shareholder in Value Capital Partners (VCP). VCP — which is low-key at the best of times — has been fairly reticent on its AdvTech position. Would it like to see the business segments — schools, tertiary and human resourcing — split out? Would an enlarged school segment, enhanced by the best of Curro’s school portfolio, be a viable proposition?
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