A reinvigorated Grand Parade Investments (GPI) finds itself in a rare position for an investment company — trading at a premium to its net asset value (NAV).
The group, which is now controlled by investment banker Greg Bortz’s GMB Liquidity Corporation (GMB), said on Friday that its shares are trading at a 27% premium to NAV — a stark contrast to just three years ago when the shares offered a more than 30% discount.
Most investment companies trade at marked discounts to NAV — including JSE stalwart Remgro, where the gap is roughly 45%.
The premium might be explained by GPI’s renewed focus on cash-generating gaming assets and a commitment to reduce what in previous years were exorbitant head office costs. GMB has already indicated a willingness to retain GPI’s valuable gaming assets — most notably minority stakes in the GrandWest casino in Cape Town and alternative gaming business Sun Slots — and to build out the portfolio. Bortz is a main shareholder in the Kenilworth Race Course, and one of his partners in that venture is the founder and owner of sports betting business Hollywoodbets.
GPI's interim financial statements released on Friday show that its profit soared as the hospitality sector continued its recovery, helped by a strong performance from the gaming assets that are controlled and operated by Sun International. A reduction in the costs of its corporate head office also boosted bottom line.
The company, which is valued at R1.57bn on the JSE, reported that profit from continuing operations jumped 41.3% year on year to R42.7m and more than doubled to R32.3m for SunWest, which owns Grand West in Cape Town.
A dividend of 12c a share was declared, amounting to R56.4m.
Over the past few years, GPI has set out to unlock value for shareholders by selling underperforming investments, including its stake in fast-food chain Burger King and unbundling its interest in restaurant franchiser Spur Corporation.
“The group has successfully reduced debt, exited most of its non-performing and noncore assets, and has effectively reverted to its gaming roots,” the company said. “The group has also resumed dividend payments to shareholders after a prolonged period.”
Some of the proceeds have gone to cutting debt, which was reduced by a further R38.5m to R97.4m. Cash and cash equivalents improved by 4.6% to R124.8m.
GPI recently received a mandatory offer from GMB of R3.33 per share, a 27% premium to NAV, and approval on Thursday.
GMB has in recent months acquired almost 49% of GPI. Sun International owns about a quarter of GPI.
Business Day reported in December that in the highly unlikely event of all minority shareholders accepting the mandatory offer, GMB will need to pay just more than R1bn to fund the transaction.
Sun Slots, which specialises in limited-payout machines and electronic bingo terminals, and SunWest together generated almost all the profit after tax in the latest reporting period.
GPI’s headline earnings per share, which strips out one-off and exceptional items, more than doubled to 9.9c, while earnings per share improved by 5.9c to 9.9c.
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