Low-hang­ing fruit

Finweek English Edition - - Companies & Markets -

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.

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