Plague diary, week seven: One of the more embarrassing moments of my career was turning up for an interview with a venture capital company with blood-red eyes. I looked like an enthusiastic extra from a Cheech & Chong movie. Narcotically speaking, I was completely clean — having merely somehow got chilli onto my contact lenses during the previous evening’s epic pasta-sauce-making session.
The pain as I tried to claw the lenses out of my tightly shut eyes, I remember, was excruciating. Of course, trying to relate all of this to guffawing executives was rather humiliating.
Matters were not exactly helped by the fact that their investment relations practitioner, unable to contain his mirth, was an old friend from Rhodes University (circa the hazy mid-1980s). Much in the same vein, this week I showed the first signs of lockdown fatigue when I squeezed a tube of Moov (muscle relief gel) onto my toothbrush. Fortunately, the overpowering wintergreen stench ("Good lord," I thought briefly, "this must be the mega-power Aquafresh that the kids use) caused me to hesitate with the brush paused perilously close to my front teeth.
Speaking of burning issues, I spotted some rather high revenue and profit predictions from Labat Africa, which is now toking up its cannabis business by attempting to raise R112m. Bottom-line profits for the next two years are pencilled in at between R60m (11c a share) and R162m (30c a share). Labat executives are either smoking their socks … or the company is a really cheap conduit to an industry that might boom on heightened consumer awareness.
Still, I reckon these predictions probably pale in comparison to what the illicit cigarette sellers are making in these smouldering days of lockdown. I’m hearing R85, even R100, for a pack of 20 with demand not exactly curtailed by the government’s attempts to snuff out sales during the Covid-19 episode. While we are on the matter of sin-sector stalwarts, the local racing industry was almost hoofed into oblivion when Phumelela went into business rescue. The Oppenheimer family has ridden to Phumelela’s rescue with a much-needed R100m in the saddlebag. Clearly, the rescue was informed more by the need to save the local racing industry than specifically by Phumelela’s turnaround prospects. My interest in the development will be whether Phumelela puts some of its nonracing assets, like Supabets, up for sale … though not too many rivals in the gaming sector, these days, have balance sheets that can accommodate a sizeable acquisition.
Taking a few
I noted last week a switch from Hosken Consolidated Investments (HCI) into Tsogo Sun Gaming. That bet has not paid off yet, except that HCI subsequently weakened to under R19. I took a few at those levels, increasing my exposure to the local gaming sector even more.
I’ve been toying with booking into City Lodge, especially since Brian Joffe’s Long4Life has taken an exploratory stake in this well-run business. One of my more measured market sources crunched some eye-popping numbers on the relative value in City Lodge — but then begged me (late on Sunday night) to keep these calculations under my hat for now.
While it’s not easy to buy into the SA leisure and travel sector at this infectious juncture, I suspect City Lodge — notwithstanding competition from a formalised BnB market — might be the proxy for cashing in on a more hospitable environment in, hopefully, a not too distant future.
And in a moment of rare optimism, I took a little flutter on an array of small-cap stocks — Sygnia, Transaction Capital, Clientèle Life, Argent Industrial, AdvTech and Hosken Passenger Logistics & Rail. It would also be most helpful to see a meaningful correction in the Nasdaq — just to erase the niggling regret of having bailed my offshore tech ETF positions too early.
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