Grand Parade Investments (GPI) chairman Hassen Adams seemed a tad disappointed that shareholders did not ask more questions around the group’s gaming investments at a results presentation last week. GPI holds significant minority stakes in the GrandWest casino in Cape Town and the smaller Golden Valley casino in Worcester, as well as limited payout machine operator Sun Slots.
Market attention has been focused on GPI’s rollout of its Burger King master franchise. But the gaming side is worth monitoring, especially now that we are hearing more audible rumbles around plans to allow a second casino licence in Cape Town by allowing an existing Western Cape licence to be transferred from Langebaan (Mykonos), Worcester, Caledon or the Garden Route.
This would end a period of exclusivity for GrandWest, which has been the most profitable casino in SA over many years. While GrandWest is controlled by Sun International, rival casino group Tsogo Sun ranks alongside GPI as a meaningful minority shareholder.
Tsogo also controls the Mykonos, Garden Route and Caledon casinos, and has a significant minority stake in the Worcester casino. In other words, this shareholding arrangement should undergo delicate manoeuvrings in order not to damage the respective interests.
So don’t expect a casino development anywhere close to GrandWest’s catchment area. Possibly in the northeastern suburbs or as far as the Strand.
Adams was not going to be drawn on possible outcomes, though he made it clear that he is very much involved in the processes.
For the record, the Western Cape government projects gambling taxes to grow at an annual average growth rate of 6.3%, from R498m in 2017/2018 to almost R600m in 2020/ 2021.
The smart money suggests a diplomatic solution would be to transfer the Worcester casino licence, in which Sun, Tsogo and GPI have an interest, to Cape Town. That would probably mean transforming the Golden Valley casino into an electronic bingo terminal — creating a situation in which Tsogo might stand to benefit.
The bigger issue, however, is that the development cost of a new casino might be too much for debt-laden Sun to manage on its own.
Workfarce
Services counter Workforce posted headline earnings of almost 43c/share, backed by strong operational cash flows. At the time of writing the share was offered at 160c and bid at 140c.
That implies a trailing earnings multiple of less than four on a company that has been consistently profitable for the past five years. Workforce now trades at a discount to its tangible net asset value of 159c/share.
The big problem is share liquidity, with founder and chairman Ronny Katz and empowerment group Vunani holding almost 85% of the issued shares.
Obviously issuing shares for cash at these depressed levels won’t happen. That also means scrip can’t be mobilised for acquisitions, which in turn rules out any chance of a dividend, as the company needs to retain cash for acquisitions. Catch 22, as they say.
Some fashions change
The much respected CEO of The Foschini Group (TFG), Doug Murray, will retire in early September. CFO Anthony Thunström will take the helm after a six-month stint as CEO designate. Murray has had a rewarding innings and will be missed, but TFG’s succession planning looks reassuring in terms of keeping the business at the cutting edge.
These developments make me wonder about TFG rival Truworths, where long-serving CEO Michael Mark resist -ed retirement and left the CEO designate Jean-Christophe Garbino dangling for an excruciating period.
Mark looks comfortably ensconced — though a much smarter showing by the TFG share price must irk.
* The writer holds shares in Workforce
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