It is always worthwhile revisiting earlier calls to see how they are progressing, especially on the back of fresh news flow. Two such calls have been ports and terminals group Grindrod (GND) and restaurant franchisor Spur Corporation (SUR).
At the beginning of this year, I wrote about Spur Corp (Tucking into Spur) and highlighted both the performance and its relative undervaluation.
Since then, the group (franchisor of Spur as well as RocoMamas, Panarottis, John Dory’s and The Hussar Grill, among others) has acquired a 60% stake in Doppio Group (owner of Doppio Zero, Piza e Vino and Modern Tailors), which comes along with a bakery, supply chain and coffee expertise while bolstering the group’s day-time dining presence.
Read: Spur aquires majority stake in Doppio
Along with refinements at the group’s major franchise offering and the addition of virtual kitchens (brands that only exist for digital ordering but utilise existing infrastructure), the new management team at Spur is doing a great job at refreshing the historically sleepy QSR [quick service restaurant] group.
This refresh and refocus has come through incrementally in past results but the latest update – a trading statement and sales update for the year to 30 June – is showing it kicking into a higher gear.
Spur Corp now sees its full-year diluted headline earnings per share (Heps) growing between 78% and 83% year on year (y/y) to between 255.75 and 262.93 cents per share (cps).
Given the volatility in the environment, a closer inspection of only the second half of 2022’s diluted earnings per share (EPS) to the mid-range of the second half of 2023’s guidance shows y/y growth of 66%.
There is a prior-period tax hit that shaved off around 17% of FY2022’s earnings, but even if we strip this out of Spur Corp’s results, diluted EPS growth is staggering at around 50% or so.
Importantly, the above result has been driven by growth of the topline as the group reports franchise restaurant sales grew 31.5% y/y (15.1% y/y in H2:23E) along with footcount growth of 13% y/y (granularly, only John Dory’s disappointed in H2:23E with negative growth of -1% and Spur and Specialty Brands both being top performers).
Simply put, Spur Corporation is winning.
Grindrod
Over a year ago, I wrote about the Obvious value in Grindrod.
Last week, the logistics group published a strong trading update for H1:23 showing Heps (from continuing operations; i.e. excluding the recent sale of Grindrod Bank) growth of between 47% and 57% y/y.
From this result you would be forgiven for thinking that South Africa is booming, but it is likely driven by a cleaned-up group focusing on core operations, efficiencies, key trading routes, and – quite importantly – its investment in the Port of Maputo, which offers an alternative (or the only?) route for domestic exporters suffering from Transnet’s disastrous underperformance.
Simply put, Grindrod is winning.
We will know more when it publishes its full results on or about 25 August.
Two opportunities
In closing, Spur Corp and Grindrod are not just lowly valued by the market (Spur’s price-earnings ratio is only 11 times and Grindrod’s is 7.2, and these multiples exclude the above trading updates!) but both are showing the rarest of commodities on the JSE: growth.
* Some portfolios managed by Keith McLachlan and Integral Asset Management may hold shares in Grindrod and Spur Corporation.
Keith McLachlan is chief investment officer at Integral Asset Management.
#Grindrod #Spur #updates #gems
