Has Zeder lost its lustre?
Iam increasingly wondering whether PSG Group-controlled agribusiness investor Zeder has run its course — at least in its present form. While the group was once ranked among the JSE’S more exciting investment vehicles, the share has recently offered a wider discount with issues such as fickle agricultural conditions and land expropriation eroding sentiment.
The fact that Zeder, which carries significant debt of R1.5bn, has failed to bag a sizeable acquisition has also weighed on market perceptions, especially with a steady trickle of news about other agribusinesses moving and shaking.
The big issue at Zeder is its 27.1% stake in Pioneer Foods which, even with the share price less than half the levels seen two years ago, still accounts for 43.5% of the portfolio.
It is difficult not to view Zeder as a proxy for Pioneer — which means some interesting small investments get overlooked. An obvious solution would be to unbundle the Pioneer stake to shareholders, which would force the market to make a better assessment of the other investments like Capespan, Kaap Agri and Zaad. But unbundling the Pioneer stake would mean PSG would no longer hold a valuable kingmaker stake in Pioneer, something that could be useful if an international food player wanted to secure a sizeable foothold in SA, or — even better — if Pioneer were subject to a takeover by rival bidders.
So if Pioneer is destined to be part of the Zeder landscape for the longer term, then just how can value be unlocked or created for shareholders? One might speculate that Zeder could be readying fruit exporting group Capespan for a listing on the JSE, or even parading the business for potential buyers. I note that Capespan, which recently banked net cash of R988m after selling its partnership in a Chinese venture, separated and unbundled its promising logistics division. This division now operates independently as The Logistics Group, with a chunk of the Chinese windfall
earmarked for bolstering the more cyclical fruit marketing and farming operations under the Capespan banner.
I suspect Capespan is too small to list on the JSE, and perhaps might be better suited slotting in as part of a much larger global fruit marketing player.
The Logistics Group is not strictly an agribusiness, and I wonder whether there could be moves to shunt this off to PSG Alpha. With Capespan split up, all of a sardine we find that Zeder’s second-biggest investment is seed business Zaad at a value of R2.2bn.
So here’s a crazy notion: why not propose reversing the solidly profitable Zaad into the Quantum Foods listing?
That would take the nasty cyclicality out of Quantum’s earnings from its poultry, egg and feed operations, and increase the market interest in the counter by tempting new investors to buy into the new listing with a capitalraising exercise.
World of opportunity
Nu-world, the consumer goods manufacturer and distributor, remains an unsung small cap despite an impeccable track profit and dividend record spanning more than three decades.
The few punters who bother assessing Nu-world’s numbers would be encouraged by a resilient interim performance under stressful trading conditions. Impressive cash conversion makes dividend prospects for the full year look awfully enticing. Cash flow generated by operations topped R305m and cash flow from operations came in at R179m — equivalent to R13.86 a share and 813c a share. Not only does this provide a quality stamp to the reported headline earnings of 435c a share, but it means cash on hand sits at close to R160m.
I’d be surprised — notwithstanding the slim chances of the economy revving up later this year — if Nu-world did not declare at least a 350c a share dividend for the year ending August. That’s a rather nifty 8% forward yield on a share trading on a forward multiple of just five times.
Easy money.
The big issue at Zeder is its 27.1% stake in Pioneer Foods which, even with the share price less than half of two years ago, still accounts for 43.5% of the portfolio