CONTRARIAN fund manager Orbis Investment Management has plunged into one of the most out of favour stocks in the market, fast food restaurant owner Collins Foods, seizing a large stake in the struggling group to become among its biggest shareholders.
Heavy buying in Collins Foods by the fund manager between December 5 and December 28 helped the investor quickly amass an initial stake of 8.397 million shares, representing 9.03 per cent of Collins Foods' issued capital.
A final spending spree before New Year's Eve saw Orbis collect a total of 11.05 million shares.
This gives Orbis an 11.89 per cent holding in Collins Foods, making it roughly the group's third biggest investor. It has a history of taking large 10 per cent-plus holdings in small-caps and other stocks viewed as "down and out" by the market.
Collins Foods, which operates 119 KFC and 85 Sizzler restaurants, was the second largest sharemarket float of last year and earned itself the wrath of investors when only three months after its listing the company was forced to issue a savage profit downgrade.
Shares in Collins Foods lost a quarter of their market value in one day when the company warned its pro forma net profit after tax for the first half of this financial year would be roughly $8 million, compared with a prospectus forecast of $10.3 million. The share price dived to $1.43 and closed last year at $1.29.
The move by Orbis was preceded in November by the arrival on the company's share register of the Copulos Group, which is a fellow operator of 54 KFC restaurants in NSW. Copulos is the largest independent KFC franchisee in the country.
Copulos now owns just over 5 per cent of Collins Foods and bought in at an average price of $1.21 a share over a week-long buying spree shortly after its profit warning.
Collins Foods was floated by private equity group Pacific Equity Partners in August at $2.50 a share, and the fall-out has left a sour taste in the mouths of investors.
Notices issued to the Australian Securities Exchange show Orbis paid an average of $1.256 a share for Collins Foods stock early last month, with its second parcel of stock picked up in the last week of last month costing an average of $1.254 a share.
Orbis's other key investments include a 12 per cent stake in biotech company Acrux and an 18 per cent stake in Sigma Pharmaceuticals.
Frequently Asked Questions about this Article…
What stake has Orbis Investment Management taken in Collins Foods?
Orbis amassed an initial 8.397 million shares (about 9.03% of issued capital) with heavy buying between December 5 and December 28, then increased its holding to a total of 11.05 million shares — roughly an 11.89% stake — making it about Collins Foods' third‑largest investor.
Why did Collins Foods shares fall sharply and trigger investor concern?
Collins Foods issued a savage profit downgrade just three months after listing, warning its pro forma net profit after tax for the first half would be roughly $8 million versus a prospectus forecast of $10.3 million. The downgrade wiped about a quarter off the share price in one day, with the stock diving to $1.43 and closing the year at $1.29.
How many restaurants does Collins Foods operate and what brands are included?
According to the article, Collins Foods operates 119 KFC restaurants and 85 Sizzler restaurants.
What average prices did Orbis and the Copulos Group pay for Collins Foods shares?
Notices to the ASX show Orbis paid an average of $1.256 a share for its early‑month purchases and about $1.254 a share for its later parcel. The Copulos Group bought just over 5% of Collins Foods at an average price of $1.21 a share.
Who floated Collins Foods and at what IPO price?
Collins Foods was floated by private equity group Pacific Equity Partners in August at $2.50 a share.
What could Orbis’s large holding in Collins Foods mean for everyday investors?
Orbis is described as a contrarian manager that often takes large 10%+ positions in out‑of‑favour stocks. Its sizeable 11.89% stake in Collins Foods may signal a contrarian bet and is worth watching because it makes Orbis one of the company's biggest shareholders — but the article does not state any specific actions Orbis will take.
Who are the other major investors in Collins Foods mentioned in the article?
The article names the Copulos Group — a major independent KFC franchisee that now owns just over 5% of Collins Foods — and notes Orbis has become roughly the group's third‑largest investor. It also mentions Pacific Equity Partners as the private equity group that floated the company.
What other notable investments does Orbis hold according to the article?
The article says Orbis also holds a 12% stake in biotech company Acrux and an 18% stake in Sigma Pharmaceuticals.
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