Slow plough­ing… for now

Finweek English Edition - - Companies & markets - SIKONATHI MANTSHANTSHA

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

ZEDER... FOOD FOR THOUGHT

Source: I-Net Bridge

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