Un­der the weather

Finweek English Edition - - COMPANIES&MARKETS PORTFOLIOPUNTS - MARC HASENFUSS

THE SHARE PRICE of agribusi­ness in­vestor Zeder has been hoed down. The de­vel­op­ment is per­haps un­der­stand­able af­ter what tran­spired dur­ing the con­tro­ver­sial (failed) bid by Pi­o­neer Foods for KWV Hold­ings, with some pun­ters be­liev­ing Zeder’s un­der­ly­ing in­vest­ment strat­egy has been rat­tled.

Finweek reck­ons it may be a dan­ger­ous (and costly) as­sump­tion to write off Zeder’s abil­ity to move and shake in the agribusi­ness sec­tor. Specif­i­cally, we’re keenly watch­ing de­vel­op­ments at Zeder’s in­vest­ments, such as Kaap Agri (where an in­creased stake seems in­evitable to en­sure a big­ger stake in Pi­o­neer Foods) as well as un­der­val­ued fruit ex­porter Capes­pan.

In terms of new in­vest­ments it should be re­mem­bered there’s a con­sid­er­able war chest. Zeder is now pretty flush af­ter prof­itably cash­ing in around R250m af­ter sell­ing its take in KWV. And the com­pany still has its div­i­dends from Capevin/Dis­tell to look for­ward to…

But let’s, for a minute, lay aside pos­si­ble fu­ture ma­noeu­vrings by Zeder and con­cen­trate on the value propo­si­tion of­fered by its cur­rent share price. In the six months to end-Au­gust 2010 Zeder’s in­trin­sic value was re­flected as 278c/share. At the time of writ­ing, af­ter drift­ing near to the 220c level last month, Zeder’s share price has clawed back to 245c – in line with the last stated net as­set value of 238c/share (a val­u­a­tion that doesn’t see through to the un­der­ly­ing in­vest­ments).

We’d ar­gue its in­trin­sic value has shifted up­wards markedly since Au­gust. First, KWV’s shares were then trad­ing at 1000c on the OTC mar­ket (com­pared to a 1180c cash out by Zeder re­cently) and, sec­ond, Pi­o­neer Foods was trad­ing closer to 4 000c than the 5400c lev­els seen re­cently.

Zeder’s re­sults will be out fairly soon, but we’d guess in­trin­sic NAV at end-Fe­bru­ary 2011 would be around 300c/share. That’s an en­tic­ing dis­count to un­der­ly­ing value and one that might even prompt a share buy­back by Zeder.

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