MORE IN ITS BASKET
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