Pioneer Foods, KWV, Cipla Medpro
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