Dale Capital Executive Director looks ahead

The United States’ recession, say the U S Federal Reserve, is now ‘officially over’, but the entire First World economy is still struggling to emerge from the worst downturn since 1929-32 and in the tourist sector turnovers are down by 30% to 35% on those of 2007 peaks.

Why, then, is Dale Capital, the Mauritian Stock Exchange listed company that is active in various fields in South Africa, going ahead with some R200 million worth of acquisition and development at its Cape West Coast project, the Shelley Point Hotel, Spa and Country Club - and why is it now committed to a further R150 million investment in its new Mauritian hotel and Beach Club project, Les Ecuries?

Talking on the subject recently, Norman Noland, Dale Capital’s Executive Chairman, says that Dale Capital is adapting its strategy to the difficult economic environment in which the world now finds itself - which he described as ‘the worst downturn in my lifetime’ and likely to continue for at least a further four years – and is, he says, invested in the correct sectors.

“The fields in which Dale Capital has a stake - financial services, fish, fine foods and beverages, information technology, hotels and leisure and green energy (a new sector of investment for the group), says Noland, are all sectors where, with the right management and strategies, companies will be able to ride out this recession better than many other sectors/businesses.

“We have aligned our investments to the activities which internationally respected financial leaders identify as being the best able to shake off the impact of the recession quickly, i.e. technology, bio-technology, energy (especially electricity), food, financial services – and certain leisure investments with the right focus. This puts us in a stronger position than companies involved in, say the textile industry or property development per se.

“Such financial gurus as Faber, Roubini, Soros, Fisch, Woods, Mauldin and Rosenberg have agreed the downturn is likely to be with us for some considerable time still. This is bad news – but the good news is that growth areas likely to flourish in the next decade are emerging in the newly strong economies which, coming off a low base, are now expanding in China, Vietnam, India, certain Asian countries, Brazil - and, I would add, certain parts of Africa. Our strategy will, hopefully, enable us to benefit from this.”

Both the Mauritian and the South African tourist industries, said Noland, have traditionally been focused ‘to an unhealthy degree’ on attracting long haul European tourists. In Mauritius they account for some 600,000 visitors annually, more than double that of any other source.

A Review by Mauritius based Axys Stockbrokers has shown that the three major groups serving Mauritius - New Mauritius Hotels, Sun Resorts and Naied Resorts, which together manage some 40 hotels on the island - all saw significant intake drop-offs in 2009 and have budgeted for further drop-offs in 2010. However in every case Axys has recommended investors to hold their shares in these groups in the expectation of a tourist upturn in both Mauritius and in South Africa which they predict will come about partially as a result of their attracting new tourists from areas which thus far have been relatively insignificant contributors to their tourist trade.

“The future lies with the Asian and African tourists, especially the latter, who, although often underrated, have the potential to become major players in South African and Mauritius tourism. They were responsible for some 25% of the 2008/2009 intake in Mauritius, with 238,000 visitors and 204,000 visitors in those years and it is widely anticipated that this figure will grow.

The Mauritian government, Noland points out, is already working towards an intake of two million tourists by 2015 - more than double the current figure, which is just under one million - and South African tourism has predicted a rise of 45% in tourism by that year.

“Faced with the current global problems,” said Noland, “it would be easy to adopt a doom and gloom outlook. I am confident, however, that we will see “a new Africa” emerging which will boost the local tourist trades and offer the forward thinking investor exciting opportunities. Is there any better place to invest right now than Mauritius and South Africa?

“Our challenge, therefore, will be to attract these tourists to Mauritius and to South Africa - and it is already clear that this will, in the next decade, involve offering high value, sophisticated services and facilities at extremely competitive prices. As Clem Sunter says we must “offer the cheaper alternative”. For those who succeed in doing this, we believe that the tourist market will offer a good future – provided that we accept that the going will be tough and the competition fierce.”

During the past 18 months the Dale Group has, said Noland, reverted to its historically successful private equity focus, exiting from all of its volatile listed equity investment.

Noland now feels able to predict a steady growth in value of Dale’s investments over the next two to three years and he is confident of realising group growth targets of between 10% and 15% in net asset values.

“We are now focussed on reverting as speedily possible to resuming to payment of dividends to shareholders.”

These, he said, had consistently been at approximately 5% per annum in nine of the ten past financial years. (The group celebrates a decade in private equity in October 2010.)

Africa and, in particular, South Africa and Mauritius is not a bad place to be during the extremely tough global crisis.

Article by: www.dale-capital.com