It is always worthwhile revisiting earlier calls and see how they are progressing, especially on the back of fresh news flow. Two such calls have been ports & 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 (which is the franchisor of the restaurant chain, Spur, along with RocoMamas, Panarottis, John Dory’s, & The Hussar Grill, amongst others) has acquired a 60%-stake in Doppio Group (owner of Doppio Zero, Piza e Vino and Modern Tailors) that comes along with a bakery, supply chain and coffee expertise while bolstering the Group’s day-time dining presence.
Along with refinements at the Group’s major franchise offering and the addition of virtual kitchens (brands that only exist for digital ordering but utilize existing infrastructure), the new management team at Spur is doing a great job at refreshing the historically sleepy QSR group.
This refresh and refocus has come through incrementally in past results but the latest update is showing it kicking into a higher gear: Trading Statement and Sales Update for Year Ended 30 June 2023.
Spur Corp now sees its FY 23E Diluted HEPS as growing between +78% y/y to +83% y/y to between 255.75cps to 262.93cps. Given the volatility in the environment, a closer inspection of only H2:22’s Diluted EPS to the mid-range of the H2:23E guidance shows y/y growth of +66%.
There is a prior period tax hit that occurred that shaved of c.17% of FY 22’s earnings, but even if we strip this out of Spur Corp’s results, Diluted EPS growth is staggering c.+50% or so.
The above result is importantly 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 -1.0% and Spur and Specialty Brands both being top performers).
Simply put, Spur Corporation is winning.
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 the Bank) growth of between +47% y/y to +57% y/y.
You would be forgiven for thinking that South Africa was booming by this result, but it is likely driven by a cleaned-up Group focusing on core operations, efficiencies, key trading routes and, quite importantly, their investment in Maputo Port that offers an alternative (or only?!) route for domestic exporters suffering from Transnet’s disastrous underperformance.
Simply put, Grindrod is winning.
We will know more when Grindrod publishes their full results on or about 25 August 2023.
In closing, both Spur Corp and Grindrod are not just lowly valued by the market (Spur’s Price Earnings is only 11.0x and Grindrod’s is 7.2x, and these multiples exclude the above trading updates!) but both are showing the rarest of commodities on the JSE: growth.
ARTICLE ORIGINALLY PUBLISHED ON MONEYWEB.