Under the weather

The share price of agribusiness investor Zeder [JSE:ZED] has been hoed down. The development is perhaps understandable after what transpired during the controversial (failed) bid by Pioneer Foods for KWV Holdings, with some punters believing Zeder’s underlying investment strategy has been rattled.

Finweek reckons it may be a dangerous (and costly) assumption to write off Zeder’s ability to move and shake in the agribusiness sector. Specifically, we’re keenly watching developments at Zeder’s investments, such as Kaap Agri (where an increased stake seems inevitable to ensure a bigger stake in Pioneer Foods) as well as undervalued fruit exporter Capespan.

In terms of new investments it should be remembered there’s a considerable war chest. Zeder is now pretty flush after profitably cashing in around R250m after selling its take in KWV. And the company still has its dividends from Capevin/Distell to look forward to…

But let’s, for a minute, lay aside possible future manoeuvrings by Zeder and concentrate on the value proposition offered by its current share price. In the six months to end-August 2010 Zeder’s intrinsic value was reflected as 278c/share. At the time of writing, after drifting near to the 220c level last month, Zeder’s share price has clawed back to 245c – in line with the last stated net asset value of 238c/share (a valuation that doesn’t see through to the underlying investments).

We’d argue its intrinsic value has shifted upwards markedly since August. First, KWV’s shares were then trading at 1000c on the OTC market (compared to a 1180c cash out by Zeder recently) and, second, Pioneer Foods was trading closer to 4 000c than the 5400c levels seen recently.

Zeder’s results will be out fairly soon, but we’d guess intrinsic NAV at end-February 2011 would be around 300c/share. That’s an enticing discount to underlying value and one that might even prompt a share buyback by Zeder.