The intrinsic value of agribusiness investor
Zeder Investments [JSE:ZED] has grown to a better-than-expected 314c/share, which means the share is still discounting its underlying portfolio value by 20%. Finweek, unlike the mainstream media (which concentrates on the sum-of-the-parts value) prefers to apply the intrinsic value as the appropriate measure for Zeder’s performance.
The intrinsic value is calculated using the see-through market prices for Zeder’s indirect interests in
Pioneer Food Group [JSE:PFG] and
Distell Group [JSE:DST] (discounted through Kaap Agri and
Capevin Investments [JSE:CVI] respectively) and quoted market prices for OTC-traded investments (many of which trade at earnings multiples of four and five times). In terms of value, the bulk of Zeder’s investments still reside in Kaap Agri/Pioneer Foods, which represents a hefty 45% of the R2,7bn portfolio.
As we’ve argued previously, it would probably make sense for Zeder to pursue a bigger stake in Kaap Agri (currently 43,9%), maybe even pitch an offer to buy out minorities. But the price of Pioneer, which underpins Kaap Agri’s OTC price, has run hard of late, which might see Zeder temper its enthusiasm for the food brand’s conglomerate.
Where Zeder is clearly finding value is in fruit exporter Capespan, where its stake has grown markedly from around 15% to almost 23%.
One presumes Zeder will push its stake to around 34,9% – a development that would be made easier if it could buy out the significant stake held by British-based Total Produce plc. Zeder, with its proceeds from the recent sale of its KWV holding in the bank, can easily afford to make a big move on Capespan. But Total Produce, which has a joint venture for Britain and Europe with Capespan, is very unlikely to sell its stake anytime soon.
Accumulating unlisted shares isn’t always easy, especially when OTC trade in Capespan isn’t exactly vibrant. And it could become even harder, with Finweek noticing other professional investors have cottoned on to Capespan – most notably, Titan, the nominee company linked to retail tycoon
Christo Wiese.
Zeder CEO
Antonie Jacobs is a little cagey about Zeder’s long-term plan for Capespan, but says: “All we know is that there’s big value in the company.”
Capespan shares currently trade at around 135c on the OTC market against a net asset value of around 275c/share. Apart from the deep value, Capespan is a great dividend play, paying a final dividend of 8,5c/share in the year to end-December 2010.
Perhaps the most interesting development at Capespan – and perhaps a reason for Zeder to hasten its efforts to pick low-hanging fruit – was the appointment of new CEO
Johan Dique earlier this year. Fruit industry sources expect Dique, who enjoyed a successful stint at Senwes, to drive Capespan’s efforts in consolidating its fruit marketing segment.
Disappointingly, other investments of R318m aren’t listed. Hopefully, there will be more detail in its annual report – especially since those so-called “other investments” have almost doubled from R163m at year-end 2009.
Fees galore
ZEDER’S MANAGEMENT and performance fees payable to majority shareholder PSG have topped R200m since inception in 2007. Zeder’s management fee is R163m, while performance fees – not paid over the past few financial years – came in at around R40m. Total fees paid since Zeder listed on the JSE represent around 8% of its current market capitalisation of roughly R2,4bn.