Pi­o­neer Foods, KWV, Ci­pla Med­pro

Finweek English Edition - - Cover -

WHILE THE FOOD SEC­TOR of­fers nu­mer­ous de­fen­sive op­por­tu­ni­ties – from AVI to Tiger Brands – Pi­o­neer is Sav­ille’s pre­ferred stock. Aside from the po­ten­tial of­fer by Tiger Brands for AVI, Pi­o­neer – which in­cor­po­rates brands such as ProNutro, Re­dro and Bovril – is sup­ported by the fact that its share is trad­ing around its net as­set value. It has an un­de­mand­ing rat­ing on earn­ings with a trail­ing mul­ti­ple of 7,3 times and a div­i­dend yield of 4%, with de­cent growth prospects.

Al­co­hol pro­ducer KWV holds a one-third stake in Dis­tell, which man­u­fac­tures Amarula, Main­stay and Sa­vanna cider.

Says Sav­ille: “Busi­nesses in­volved in the man­u­fac­ture and sale of al­co­holic bev­er­ages of­fer use­ful de­fen­sive qual­i­ties in the cur­rent en­vi­ron­ment. KWV Be­leg­gings trades at 1,8 times its NAV. We think a fig­ure closer to two and a half to three times is a fairer mul­ti­ple. It’s on a trail­ing earn­ings yield of 11,5% and a his­toric div­i­dend yield of 5,7%.”

Sav­ille is also par­tial to the health­care sec­tor and has an un­usual en­try point. Rather than pick the pop­u­lar Aspen he prefers Ci­pla Med­pro, pre­vi­ously known as Enaleni. “Its share price trades on a his­toric mul­ti­ple of less than nine times and earn­ings fore­casts are ro­bust, putting it on an un­de­mand­ing for­ward mul­ti­ple of seven times.”

De­spite the fact the firm doesn’t yet pay div­i­dends, he ar­gues Ci­pla Med­pro is priced at a 20% dis­count to its NAV, mean­ing it’s cheaper to buy the share than to build a com­pa­ra­ble com­pany from scratch.

Chief in­vest­ment of­fi­cer, Can­non As­set Man­agers Adrian Sav­ille

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