Buy the dip

Finweek English Edition - - INVESTMENT - MARC ASH­TON

AGRI­CUL­TURE GROUP Zeder In­vest­ments sold off about 3% af­ter the re­lease of a trad­ing state­ment, which pro­vided earn­ings guid­ance as well as a sum- of-the-parts (SOTP) val­u­a­tion for share­hold­ers. This may well pro­vide a buy­ing op­por­tu­nity.

Re­gard­ing op­er­a­tions, the trad­ing up­date said that re­cur­ring head­line earn­ings per share (HEPS) will be be­tween 25c and 26c, or be­tween 6.8% and 10.4% lower than that for the year ended 29 Fe­bru­ary 2012. HEPS would be be­tween 19.5c and 20.5c or be­tween 33.2% and 36.5% lower than that for the same pe­riod. None of this sounds en­cour­ag­ing.

How­ever, the SOTP val­u­a­tion is in­ter­est­ing at R3.90 and R4/share, which rep­re­sents a pre­mium to the R3.70 where the counter is cur­rently trad­ing. On a p:e mul­ti­ple of 13, Zeder may be a bit rich but isn’t ex­pen­sive in the long run. PSG is trad­ing nearer 14 times earn­ings so it might make sense to buy the Zeder com­po­nent di­rectly rather than PSG. The agri­sec­tor should de­liver in the long run.

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