Cape Town’s three JSE listed empowerment companies – Brimstone, African Empowerment Equity Investments (AEEI) and Grand Parade Investments (GPI) - have all reached critical junctures in their corporate development.
All three companies have strong community roots in Cape Town, and have stoically endured the slings and arrows of outrageous fortune since the late nineties. Each company has needed to dig deep to pull through challenging times; Brimstone saw its share price tumble to alarmingly low levels after a restructuring of its portfolio, AEE was on the canvass after the LeisureNet implosion and GPI had to survive a hostile takeover before it listed on the JSE.
Their collective fortitude – during a period where larger and more hyped empowerment entities flagged and fizzled - has paid off and all three companies now look set to push ahead with rewarding new ventures that could create heaps of value for professional and community shareholders alike.
The collective value of these BEE entities currently sits at almost R8bn – the biggest being Brimstone with a market value of almost R4bn, followed by GPI (R2.8bn) and AEE (R1.3bn.) This is an astounding achievement considering these companies were started from scratch with mainly small investments from community members.
Common to all has been a determination to play an active role in underlying investments and to back strong brands or assets that generate steady cash flows. All three are now firmly in dividend paying positions – Brimstone and GPI have sustained dividends for a number of years and AEE paying its maiden dividend last year (with a promise of more to come.)
All three are well capitalised and can be regarded as empowerment deal defaults – which means established companies are likely to approach these entities with proposals for BEE deals.
Brimstone is underpinned by valuable minority holdings in JSE listed private hospitals group Life Health and fishing group Oceana. The group headed by the potent triumvirate of Mustaq Brey, Fred Robertson and Lawrie Brozin also holds interests in other listed companies like franchising group Taste Holdings, fashion retailer Rex Trueform (see page 2) consumer brands conglomerate Tiger Brands and shipping/logistics giant Grindrod.
But Brimstone has lately signalled a growing appetite for the food sector – which is where CBN believes there might be some inspired deal-making in the years ahead. Aside from the holdings in Oceana and Tiger Brands, Brimstone holds a controlling stake in market leading hake fishing business Sea Harvest. Sea Harvest is mainly a value-adding food company – catching and processing hake for the frozen fish market. But Brimstone could look at using Sea Harvest as a base to expand its food offering by adding other frozen and non-frozen food applications. For instance, there have been whisperings over the years that Brimstone may swoop on the poultry sector.
Another possible thrust in the food segment could come from Brimstone’s association with Taste, which has snagged the local Starbucks coffee licence as well as the rights to iconic global pizza brand Dominos. To date Brimstone has been happy to back Taste’s ventures, and the empowerment company could well become a more active partner in future endeavours.
AEE – formerly the old Sekunjalo Investments – also has plenty on its plate. The company’s share price has surged in the last 18 months as cash flows from operations increased markedly. AEE has scored strongly from strategic investments in British Telecoms as well as consumer brands giant Pioneer Foods as well as steady performances from its fishing and technology interests. But more intriguing is the talk in the market is that AEE could look to separately listing its Premier Fishing subsidiary on the JSE.
Premier Fishing – which is very strong in the south coast and west coast lobster export markets – could well use the listing as a platform to chase down deals to diversify its earnings base. The company has already successfully moved into the pelagic sector, and might fancy broadening its catch even further by buying out other fishing ventures. Premier is also involved in abalone farming, another seafood segment that might be ready for corporate action.