Finweek English Edition - - Companies & Markets - ANDILE MAKHOLWA

TIGER BRANDS’ BUY­ING may­on­naise pro­ducer Crosse & Black­well (C&B) may not com­pen­sate for its failed bid to ac­quire food pro­ducer AVI but it’s cer­tainly a step in the right di­rec­tion in its am­bi­tion to add more brands to its bas­ket.

Last month con­sumer goods group Tiger Brands con­cluded a deal with the Nestlé group to ac­quire the C&B’s Bel­lville plant for an undis­closed amount, sub­ject to reg­u­la­tory ap­provals.

Tiger’s am­bi­tion to ex­pand its brands through lo­cal and over­seas ac­qui­si­tions was re­it­er­ated by CEO Peter Mat­lare three weeks ago when he de­liv­ered its in­terim re­sults to March 2009.

Reuben Beelders, port­fo­lio man­ager at Gryphon As­set Man­age­ment, says the C&B pur­chase is a bolt-on ac­qui­si­tion and won’t have a ma­jor im­pact on Tiger’s fi­nan­cial for­tunes. How­ever, he says buy­ing a com­pany in the cur­rent slow­down is good in terms of re­al­is­tic pric­ing.

Tiger’s in­terim re­sults are a mixed bag. Head­line earn­ings per share for con­tin­ued op­er­a­tions rose by a mod­est 8% to 607,1c, while its in­terim div­i­dend re­mained un­changed at 245c/share. But the group’s short-term bor­row­ings shot up to R1,7bn from R550m in the pre­vi­ous pe­riod due to, among other things, money raised for the failed AVI bid. Beelders says Tiger is a good in­vest­ment. “I’d rate Tiger as a buy, purely be­cause it’s a highly cash gen­er­a­tive busi­ness and de­fen­sive at this point in the cy­cle.”

McGre­gor BFA an­a­lysts fore­cast Tiger’s earn­ings yield to in­crease from 9% to 11% over the next two years while its div­i­dend yield is fore­cast to in­crease from 4,5% to 5,6% over the same pe­riod. Those are also at­trac­tive prospects for po­ten­tial in­vestors. OP­POR­TU­NI­TIES

ex­pan­sion over­seas looks good for fu­ture re­turns. RISKS

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