THERE’S VALUE… and then there’s VALUE. Capespan, the unlisted fruit marketing company, definitely belongs in the latter category. The group’s latest annual report (downloadable at www. capespan.co.za) reinforces the notion that some of the best (unrecognised) value for investors lies in the surfeit of old co-operative companies now plying their trade as private enterprises.
Capespan is a fairly simple business. It exports a variety of fruit (around 55m cartons) – which includes operating fruit terminals and running shipping services. Perhaps the most significant change to Capespan – which includes the operations of Unifruco and Outspan – is its flexibility in sourcing fruit from outside South Africa. Its annual report shows fruit is currently sourced from 40 different countries. Last year, around 36% of all fruit it marketed was sourced outside SA, which is certainly one way of working around the strong(er) rand.
The year to endDecember 2009 wasn’t the best trading period for Capespan, with the global financial crisis and the strong rand hampering performance. But turnover of R2,5bn was turned into not-too-shabby operating profits of R173m – a trading margin of 7% in less than optimum trading conditions. Headline earnings came in at 33,7c/share, which means the share – at its current bid/offer spread of 125c to 130c – is trading on a historical earnings multiple of around four times. And remember 2009 wasn’t a good year… even though an 8,5c/share dividend was paid.
However, looking past earnings its annual report shows Capespan carries a net asset value of 250c – almost double its current share price. For what’s essentially a services company to trade at such a big discount to NAV is quite astounding – especially since its balance sheet isn’t exactly loaded with intangibles and goodwill (those, for the record, total around R62m of R14bn of total assets).
Capespan is the proverbial low-hanging fruit for patient, valueinclined investors. Not surprisingly, PSG’s agribusiness investor, Zeder, is a major shareholder, with a rather useful 13,2% stake.