Still not con­vinced

Finweek English Edition - - MARKETPLACE -

Rhodes Food put out a trad­ing state­ment in­di­cat­ing that nor­malised di­luted head­line earn­ings per share (HEPS) is ex­pected to be 35% to 40% higher. Now we need to see what the nor­malised is about when it is­sues the re­sults later this month. But on the sur­face this is a good up­date from a stock I have been neg­a­tive about since it listed in late 2014 at around 1 000c. My con­cerns re­main, al­though so far I am be­ing proven very wrong with the stock up at around 2 500c. My is­sue is that pro­vid­ing pre­pared foods for re­tail­ers and condi­ments for sit-down and take­away food out­lets is a tricky busi­ness. The re­tailer is al­ways look­ing for ways to im­prove mar­gins and one way to do this is to squeeze the sup­plier, in this case Rhodes. Now, maybe the com­pany’s prod­ucts are so amaz­ing that it ac­tu­ally has the pric­ing power, but I am not con­vinced by that story. A pie is a pie and jam is jam, can that re­ally com­mand pric­ing power? So far the mar­ket is say­ing yes, but I re­main un­con­vinced about this group’s long-term prospects.

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