Buy the dip
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.