Adcock Ingram has gone onto my watch list. My never-ending tennis troubles will no doubt boost the pharma giant’s sales. After being (again) roped in to play singles at the vulnerable side of my 50s, I am munching premium-priced Arthroguard as if they were Smarties.
I was given a royal runaround by an imperious (and evergreen) Ronnie Buthelezi at a stifling Green Point on Saturday, after which my left knee creaked audibly. We dug deep and eventually ground out an important victory, taking more than a leaf from Brad Gilbert and Steve Jamison’s superb tome Winning Ugly: Mental Warfare in Tennis — Lessons from a Master during the doubles encounter.
Victory was slightly soured by the terse dressing-down I received from one of the Green Point ladies. My offence? I broke protocol by taking a few delicately crafted cheese and tomato sandwiches from the wrong table. Rookie mistake; I really should have recognised the men’s league table from the chips and Romany Creams.
Speaking of bitter fare, I was chatting to a well-known “deep value” investor when the topic of fast food and restaurants came up — specifically whether the brands owned by stalwart listings Famous Brands and Spur Corp are less relevant or command a strong position in the market. I don’t do fast food any more, and very rarely eat out. I mean, why leave the house when there is an abundance of matzos and smashed avo, not to mention a thriving veggie patch, to plunder?
Both my children have outgrown the Spur stage. But my wife and I used to be immensely grateful to head to the local Spur for a glass (or seven) of wine, while the kids could run amok for an hour and a half. Neither of them ever finished a Chico the Clown ice cream, which might have explained my chunky look in those years.
I’d be happy to ladle Spur, which must have paid a good chunk of its current share price in dividends in the past 10 years, into my portfolio at present levels
As far as I can see, my son — now at university — occasionally orders Uber Eats (which I assume could be Steers, Spur or Burger King). But since we bought him an air fryer, he seems content to braise chicken schnitzels and veggies for his main fare. My 16-year-old daughter, I know, would not cross the threshold of a big-brand fast-food joint, preferring the hip aloofness of small coffee shops and sushi bars.
That said, my local Spur restaurants are always bustling and I see many fast-food delivery bikes whizzing past me in Fish Hoek. Spur and Famous Brands are both sitting fairly close to their respective 12-month lows, with earnings multiples of 14.4 and 11.7.
Spur has lost about 23% over five years, and Famous Brands has been chewed down 45%. These are both quality businesses that over the years have generated reassuring cash flows and paid out nutritious dividends. I’d be happy to ladle Spur, which must have paid a good chunk of its current share price in dividends in the past 10 years, into my portfolio at present levels. Famous Brands, in particular, looks to be tilting to the cheap side, especially considering its scale and brand diversity. If the share price matches the price of the Original Steers Burger, I might be tempted to take a nibble for the longer term.
Timing looks right
Looking at other rich flavours, household goods distributor Nu-World’s value proposition continues to amaze me. Yes, the group had a torrid year to end-August with revenue up 8% to R2.15bn, but after-tax income plunging from R142m to R85m. What saved the bottom line was an exchange difference gain of R69m (vs a R58m loss last year), which pushed attributable income up 82% to R154m. Cash flow turned negative to the tune of R183m, but with a healthy cash balance, Nu-World opted for a nearly 150c a share dividend.
What might worry punters is that the core South African operations appear to have run at a loss in the second half — remembering that profits of R112m at the interim period dropped to R45m for the full year. I don’t think the first half of the new financial year will be any easier for local operations. Yet at the end of August Nu-World still had R338m in cash, equivalent to about R15 a share.
That means the cash holding — likely to be whittled down during the first half of the 2023 financial year — represents more than 60% of the share price. I have a “hard” NAV estimate of about R55 a share. If ever there was a good time to pitch an offer to minority shareholders …
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