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Investment analysis: Spur Corporation Ltd

By Danielle van Wyk

Founded by Allen Ambor in 1967 and headquartered in Cape Town, South Africa, Spur Corporation Ltd (Spur) is a multi-brand restaurant franchisor.

The home of four of South Africa’s largest sit-down restaurant chains, namely, Spur, Panarottis, RocoMamas and John Dory’s, investors are given exposure to the fastest-growing middle class in the country. Fast food chain Captain DoRegos is also part of the Spur brand.

“Captain DoRegos extends the group’s franchise interests in the lower LSM (living standard measure) sector and fast-food market while The Hussar Grill and Casa Bella adds an upmarket steakhouse and woodfired pizza pasta chain to the group’s brand portfolio. The group’s presence is predominantly in South Africa, but extends to Australia, Mauritius, the United Kingdom, Ireland and certain countries in Africa (including Namibia, Botswana, Lesotho, Swaziland, Zimbabwe, Zambia, Malawi, Tanzania, Kenya, Uganda and Nigeria),” stated Spur.

The company is further segmented into manufacturing and distribution sectors.

Investing in Spur

“Spur operates within the retail sector and is listed on the Johannesburg Stock Exchange (JSE) under the ticker SUR. If one wanted to invest in Spur one could do this through a registered broker like EasyEquities, which offers the man on the street the ability to invest in the stock market. Through a broker like EasyEquities which offers the lowest cost in the country anyone can invest in all JSE listed companies with ease,” said Paul Khweyane, for trade and research at the Purple Group Limited.

Some of Spur Corps biggest competitors are companies like Taste Holdings, Famous Brands and Grand Parade.

“Spur hasn’t fared too badly against its major competitors, ranking third behind Taste Holdings and Famous Brands. The charts below show how it has performed compared to its competitors over the last year and six months,” Khweyane added.

In agreement was analyst Gary Booysen from Rand Swiss, as he chatted to CNBC Africa: ““With almost a 40 year track record, it’s been fairly cash generative over the period and it pays a good dividend yield as well. I think if you look back maybe 5 or 10 years ago, it stagnated a little bit, the share price flattened out, and it was more of dividend plan and didn’t have growth opportunities.

“I think it’s now looked at what Famous Brands have done, and competition is good, especially if you’ve got the balance sheet and experience that Spur has to roll out.”

This in reference to Spur’s latest addition, RocoMamas.

“I think with the RocoMamas roll out, I think they’ll really be aggressively pushing that. There’s a breath of fresh air in the company, and investors may be getting excited about it again,” added Booysen.

Despite making reference to Spur’s underperformance in the international sphere and the right sizing of their international portfolios being underway, Booysen was of the opinion that we could “maybe see some more share price appreciation happening from here, it’s all going to depend on if they get it right. With the right sizing of international portfolios and making it more competitive, cost could be coming out of the business more there, so positive.”

Should you invest?

Khweyane outlined a few pointers in what to look for when investing in this sector:

“It is important to take a look at the following components - composition of their portfolio, how are or will these brands be received and what are the trends in the market i.e. are people still buying take outs? If so, are they buying and sitting or buying and going?”

He further advised that: “Before buying into this sector I would consider the broader economic environment. The IMF has revised the South African economic growth down by 0.2%, unemployment has increased to 26%, inflation has increased and the SARB is currently on its interest raising cycle. All these factors will have an impact the consumer’s affordability. And this would most likely impact sales in this sector.”

    Handy tip:  If you don’t want to invest in shares, you can gain exposure to them through investing in unit trusts.

 

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