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Spur (SUR) will be the stock in focus: (Price at time of writing: R28.99 (January 2016)
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Background and overview of Spur Corporation (SUR)
Spur Corporation consists of Spur International, Spur Steak Ranches, Panarottis Pizza Pasta, John Dory’s Fish, Grill & Sushi, Captain DoRegos, The Hussar Grill and a 50% stake of RocoMamas. Spur Corporation is discussed on greater detail below.
Scroll over or click on the funnel chart to get more details of SURs latest financial results
Financial review:
Spur Corporation owns a number of household brands, most notably Spur Steak Ranches, Panarottis Pizza Pasta and John Dory's. They have however over the last couple of years, acquired a number of lesser known brands. With the idea being that Spur Corporation can make the smaller brands expand and grow at a significant rate, using Spur's years of know how and capital backing.
Spur has been known over the years, to rather focus on organic growth (growing the companies they do have) instead of growth by acquisition. Famous Brands (FBR), another listed food and restaurant company, has followed the opposite approach. They have been on a shopping spree that would embarrass Paris and Nicky Hilton (their acquisitions include Mugg&Bean, Tashas, Milky Lane, Vovo Telo to name but a few).
In recent times it seems like the two companies have traded places. Spur has been buying companies (including RocoMama's, The Hassar Grill and Captain Dorego's), while FBR has slammed the brakes on their buying spree and is now looking to grow their businesses that they do own.
Spur has been known over the years, to rather focus on organic growth (growing the companies they do have) instead of growth by acquisition. Famous Brands (FBR), another listed food and restaurant company, has followed the opposite approach. They have been on a shopping spree that would embarrass Paris and Nicky Hilton (their acquisitions include Mugg&Bean, Tashas, Milky Lane, Vovo Telo to name but a few).
In recent times it seems like the two companies have traded places. Spur has been buying companies (including RocoMama's, The Hassar Grill and Captain Dorego's), while FBR has slammed the brakes on their buying spree and is now looking to grow their businesses that they do own.
The graphic below shows the contribution of Spur's holdings to their turnover/revenue and contributions to pre tax profits. Due to losses from certain divisions the pie chart representing the contributions to operating profits only shows divisions that made profits and their relative contributions to such profits. Out of total profit making divisions, Spur steak ranches contributes 65.4% of the total profits made by all profitable divisions. It is and will be the main driver of revenues and profit for Spur corporation for the foreseeable future.
Rocomama's is busy rocking Spur's world. There has been a massive increase in the number of new RocoMama stores opening and their popularity has gone from strength to strength. When Spur acquired Rocomama's in March 2015 there were only 3 stores open, by end June 2015 (when Spur Corporation presented their financial results there were 9 restaurants open). Currently (Feb 2016) there are 32 RocoMama restaurants open with another 9 coming soon. It certainly seems that Spur is aggressively pursuing RocoMama's expansion in South Africa (and who knows maybe internationally too if their local success continues).
Valuation
While the consumers in South Africa are under pressure, there seems to be little stopping them from dining out more regularly and foregoing cooking at home. Spur seems to have changed their conservative organic growth strategy for a more aggressive growth by acquisition and rapid expansion strategy. They hold extremely strong brands (in particular with Spur Steak Ranches, Panarotti's and John Doy's, and it seems in the not to distant future Rocomama's will be added to that list too.
Based on Spur's current financial results and financial statements, its brands and the market they operate it, we value Spur Corporation at between R34.40 and R34.60
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
Based on Spur's current financial results and financial statements, its brands and the market they operate it, we value Spur Corporation at between R34.40 and R34.60
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.