Pick­ing low-hang­ing fruit

How much of Capes­pan can it get?

Finweek English Edition - - COMPANIES&MARKETS - MARC HASENFUSS marc.hasenfuss@finweek.co.za

THE IN­TRIN­SIC VALUE of agribusi­ness in­vestor Zeder has grown to a bet­ter-thanex­pected 314c/share, which means the share is still dis­count­ing its un­der­ly­ing port­fo­lio value by 20%. Finweek, un­like the main­stream me­dia (which con­cen­trates on the sum-of-the-parts value) prefers to ap­ply the in­trin­sic value as the ap­pro­pri­ate mea­sure for Zeder’s per­for­mance.

The in­trin­sic value is cal­cu­lated us­ing the see-through mar­ket prices for Zeder’s in­di­rect in­ter­ests in Pi­o­neer Foods and Dis­tell (dis­counted through Kaap Agri and CapeVin re­spec­tively) and quoted mar­ket prices for OTC-traded in­vest­ments (many of which trade at earn­ings mul­ti­ples of four and five times). In terms of value, the bulk of Zeder’s in­vest­ments still re­side in Kaap Agri/Pi­o­neer Foods, which rep­re­sents a hefty 45% of the R2,7bn port­fo­lio.

As we’ve ar­gued pre­vi­ously, it would prob­a­bly make sense for Zeder to pur­sue a big­ger stake in Kaap Agri (cur­rently 43,9%), maybe even pitch an of­fer to buy out mi­nori­ties. But the price of Pi­o­neer, which un­der­pins Kaap Agri’s OTC price, has run hard of late, which might see Zeder tem­per its en­thu­si­asm for the food brand’s con­glom­er­ate.

Where Zeder is clearly find­ing value is in fruit ex­porter Capes­pan, where its stake has grown markedly from around 15% to al­most 23%.

One pre­sumes Zeder will push its stake to around 34,9% – a de­vel­op­ment that would be made eas­ier if it could buy out the sig­nif­i­cant stake held by Bri­tish-based To­tal Pro­duce plc. Zeder, with its pro­ceeds from the re­cent sale of its KWV hold­ing in the bank, can eas­ily af­ford to make a big move on Capes­pan. But To­tal Pro­duce, which has a joint ven­ture for Bri­tain and Europe with Capes­pan, is very un­likely to sell its stake any­time soon.

Ac­cu­mu­lat­ing un­listed shares isn’t al­ways easy, es­pe­cially when OTC trade in Capes­pan isn’t ex­actly vi­brant. And it could be­come even harder, with Finweek notic­ing other pro­fes­sional in­vestors have cot­toned on to Capes­pan – most no­tably, Ti­tan, the nom­i­nee com­pany linked to re­tail ty­coon Christo Wiese.

Zeder CEO An­tonie Jacobs is a lit­tle cagey about Zeder’s long-term plan for Capes­pan, but says: “All we know is that there’s big value in the com­pany.”

Capes­pan shares cur­rently trade at around 135c on the OTC mar­ket against a net as­set value of around 275c/share. Apart from the deep value, Capes­pan is a great div­i­dend play, pay­ing a fi­nal div­i­dend of 8,5c/share in the year to endDe­cem­ber 2010.

Per­haps the most in­ter­est­ing de­vel­op­ment at Capes­pan – and per­haps a rea­son for Zeder to has­ten its ef­forts to pick lowhang­ing fruit – was the ap­point­ment of new CEO Jo­han Dique ear­lier this year. Fruit in­dus­try sources ex­pect Dique, who en­joyed a suc­cess­ful stint at Sen­wes, to drive Capes­pan’s ef­forts in con­sol­i­dat­ing its fruit mar­ket­ing seg­ment.

Dis­ap­point­ingly, other in­vest­ments of R318m aren’t listed. Hope­fully, there will be more de­tail in its an­nual re­port – es­pe­cially since those so-called “other in­vest­ments” have al­most dou­bled from R163m at year-end 2009.

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