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Johannesburg - Unlisted shares in Paarl-based liquor group KWV Holdings touched a high of 1 100c on the over-the-counter market this week.
This means KWV shares have gained over 35% since September last year, when the old KWV Limited was split into KWV Holdings (the operating business) and CapeVin Holdings (the investment business with a stake in JSE-listed Distell [JSE:DST]).
There appears to be more widespread interest in KWV, judging by the pockets of sizeable trades that have taken place in the share in the last two months.
Market watchers suggested that investors have taken cognisance of KWV's stated goal of tripling its market value within five years to become a R1.5bn company by October 2014.
The chances of KWV achieving this ambitious target were recently enhanced by an encouraging performance for the half-year to end December 2009. Despite tough trading conditions locally and abroad, the company managed a gross trading margin of 38% and net operating margin of almost 9%.
What has also helped push KWV's share price is an independent pronouncement by KPMG - in the wake of a mandatory offer to shareholders from Zeder Investments and Rootstock Capital - that the company’s shares were worth between 1 150c/share and 1 450c/share.
More intriguing, however, is increasingly audible gossiping around KWV taking a stab at the ready-to-drink market - a segment where Stellenbosch-based rival Distell has carved a very viable niche.
KWV recently shifted out of its traditional wine and brandy comfort zone by acquiring small liqueur producer Wild Africa.
But an investment into RTD production would require a much bigger investment, possibly running into the hundreds of millions of rands.
KWV, which generated strong cash flows in the interim period to end-December 2009 and clinched a R150m rights issue late in 2009, does have a well-reinforced balance sheet with net cash sitting at over R200m.
Some market watchers have raised the possibility of a generous year-end dividend (as reported recently in Finweek). But if a shift into RTDs is on the cards, KWV will need to retain cash.
Approached for comment on the RTD rumours, KWV CEO Thys Loubser told Fin24.com recently that "the ready-to-drink market is still growing on the African continent and therefore it is of interest to KWV".
- Fin24.com
