Slow ploughing… for now
IN THE FIVE MONTHS after listing on the JSE, Zeder Investments has been slowly increasing its investments in the companies in which it’s invested. A total of R191m has been spent buying shares over that period.
Prior to listing in December 2006, Zeder owned just 13% of KWV Ltd, 2,6% of food producer Pioneer Foods and 5% of Kaap Agri – together making up 60% of its investment portfolio.
Zeder’s financial statements in its maiden results for the four months to end-February 2007 show it spent R191m in investment activities but wouldn’t say how the money was spent. A comparison of the results with its pre-listing statement shows Zeder has ramped up its holdings in KWV and Pioneer Foods to 14,9% and 5,3% respectively.
Its stake in Kaap Agri hasn’t changed at the maximum allowed of 5%, but it has increased its shares in Senwes from 2,2% to 3% at end-February. However, the biggest increase is the 6% in OVK Operations from 1,7% in December.
In an investment portfolio update to shareholders in January, Zeder announced it had made new investments in two companies: BKB (2,7%) and NWK (2,9%). The NWK stake has now been upped to 3,5%, worth R18m, while its pre-listing 5,6% in KLK Landbou is now 7,3% (R19m). However, not much has changed in its Senwes investment to the current 2,8% (R20m) from a pre-listing position of 2,2%.
CE Antonie Jacobs says the company isn’t having an easy time increasing its stakes in some investments. Says Jacobs: “Kaap Agri won’t allow us to lift our stake above 5%. If it does, we’d gladly buy more (shares).”
Jacobs says Zeder is buying into Pioneer Foods – among others – but not “massive amounts” at this stage. The company’s stated objective is to build its stakes in the agribusinesses to between 20% and 25% and take board positions where possible. Building up those investments to the stated targets would be critical, as investors would most likely judge Zeder on its successes or failures to determine whether it’s a passive little pussy or a tiger with sharp claws.
Its three largest investments are worth a combined R622m, but together Zeder’s agri portfolio is worth almost R690m. Together with its cash component of R630m, the company’s worth around R1,3bn – giving it a net asset value of 224,5c/share. At the time of writing, Zeder was trading at around 270c/ share, giving it a market cap of R1,5bn – a R200m (40c/share) premium.
Perhaps the reason for the confidence shown by the market in Zeder can be found in its reliance on companies exposed to strong brands in the food industry and agricultural markets.
They’re mostly asset rich and strong brands that deliver good underlying cash flows, such as KWV and Pioneer Foods. KWV holds 30% of wine and spirits maker Distell and 50% of KWV-Remgro Investments; while the unlisted Pioneer Foods houses mainly mass
staple food assets, such as Blue Bird Maize, Bokomo breakfast products and Sasko Sam, among others.
Says Zeder in a commentary accompanying its February 2007 results: “Zeder’s profitability depends on dividend income emanating from its investments, as well as the positive market movements in its portfolio. Having regard to the quality of the portfolio and depending on the markets, this portfolio should experience modest growth.”
Owned 35,5% by PSG and 13,1% by Sanlam, Zeder says it will increase its shareholding in “certain of its underlying investments” and is constantly investigating opportunities that may require substantial cash outlays. That should provide for more appetising possibilities, as the legendary Jannie Mouton, Zeder’s chairman, is a highly innovative investor.
Slowly buying up. Antonie Jacobs