Fertile ground?

About 20 years ago, the JSE looked set for a boom in agribusiness stocks. Many of the old co-ops were attracting attention from value-inclined private investors — most notably retail tycoon Christo Wiese, with his foray into the old KWV group.

There were also several mergers and takeovers among smaller co-ops looking to build more compelling operating portfolios and create diversity against the cyclicality of the farming sector.

For a while the JSE’s mainstay agrilisting was OTK, which later became Afgri. That listing has since shuffled off the bourse.

PSG-aligned agribusiness investor Zeder then became the poster child for the “corporatisation” of the farming sector. It quickly snapped up meaningful stakes in KWV, the old Agri

Voedsel/Kaap Agri (including a kingmaker stake in

Pioneer Foods) and various seed businesses as well as the old

Capespan Group. But then corporate activity seemed to slow, after

Zeder failed to get its way at KWV (it wanted to slot the wine and spirits producer into the Pioneer Foods beverages segment) and Zeder became a more mundane value play.

As things stand, investors are likely to find the more exciting agribusiness plays outside the JSE.

The biggest mealie is Senwes, which was briefly listed on the ZAR X exchange. It’s a sprawling agribusiness, but investor interest is muted because of its serious liquidity issues. There is a woefully small free float of shares on the over-thecounter market, with holding company Agribel speaking for the vast majority.

The newly launched Cape Town Stock Exchange provides more fertile ground for those keen to plough money into agriventures. It has two powerhouse listings in NWK and TWK, and will soon host Eastern Cape-based BKB.

All three companies are worth a closer look, especially for patient investors who prefer solid underlying value and the potential for reliable dividend flows.

While the agribusiness action seems to be happening off the JSE — and in this regard the FM wonders what plans unlisted agri-investors such as Acorn Agri & Food have for some of their interests — the JSE still offers some intriguing options.

Zeder, for instance, trades at a 29% discount to its sum-of-the-parts valuation of 472c a share. The group recently sold its stake in The Logistics Group (TLG) for more than its initial valuation, but it may be trickier to offload other large unlisted investments, such as fruit marketing and farming business Capespan.

The controlling stake in seed business Zaad (worth more than R2bn) has potential for an international listing, but possibly only after a few bulking-up deals and a more convincing profit record.

One possible outcome is that Zeder, after completing the TLG sale

and disposing of Capespan, pays out a generous special dividend and unbundles its stake in listed (and highly profitable) agriservices business Kaap Agri. That will leave it with its controlling stake in Zaad (along with a few rats and mice), effectively becoming a standalone listing for the seed business.

Other listed counters to watch include Crookes Brothers and York Timbers. Both have new “directional” shareholders in the form of SilverStreet Capital and A2 Investment Partners.

Crookes has had mixed results in its efforts to diversify away from its sugar farming business: success in bananas; a slightly bitter experience in deciduous fruit; and recent signs of success in its thrust into macadamias.

York — just before the arrival of new activist shareholders — had made a decision to branch into citrus, avocados and macadamias. It’s early days, but there are more than a handful of shareholders who reckon York should have sharpened its focus on its core (and hugely undervalued) timber business before embarking on new farming ventures.