Publications
Partners
AT CLOSE of market on Thursday (when this column was penned) the share price of Zeder Investments [JSE:ZED], controlled by PSG Group [JSE:PSG], was reflecting roughly a 15% discount to its intrinsic value of 278 cents per share at the end of August.
Now we all know that a 15% to 20% discount on an investment trust is pretty much par for the course. In fact, discounts of over 40% are not that uncommon – and some readers may remember dismissive valuations placed on Venfin (before the Vodacom Group [JSE:VOD] stake sale) and Brimstone Investment Corporation [JSE:BRT] (before the Life Healthcare Group Holdings [JSE:LHC] transaction).
So does a discount of only 15% mean Zeder is fully valued?
I would argue "no", because I don’t think Zeder can be classified as your typical passive investment company structure.
For one thing, Zeder is a specialist investment vehicle that dabbles in deep value situations in the agrisector. Basically – and I trust I am not oversimplifying Zeder’s strategy – the firm buys shares in companies where the unlisted share price markedly discounts the underlying tangible assets/investments.
While it is often not easy to pick up large parcels of shares in former cooperative companies, Zeder has done awfully well to build up meaningful stakes in a variety of value-laden contenders.
The funny thing though, is that Zeder’s investment strategy at listing in 2006 – if I recall correctly – stated that over the long term no investment would exceed 20% to 25% of the portfolio value, and neither would Zeder acquire more than a 20% to 25% stake in any one company.
I think this was put on record to placate farmer shareholders in the various former cooperatives, who might initially have been somewhat suspicious of the intentions of the suits from Stellenbosch.
But there has since been a considerably veering away from that initial strategy. I’m not being critical; actually, the development enhances Zeder’s status as a mover and shaker in the agribusiness sector.
Although not its biggest investment, Zeder’s flagship holding is the old KWV Limited, which now is broken into a R215m (or 31%) holding in KWV Holdings and a R552m (37%) holding in Capevin Holdings (which taps into JSE listed Distell Group [JSE:DST]).
The old KWV components comprise 37% of Zeder’s total portfolio – although individually Capevin is about 25% and KWV Holdings just over 10%.
The 41% stake in Kaap Agri (which is the biggest shareholder in Pioneer Food Group [JSE:PFG]) is worth over R800m – representing almost 40% of Zeder’s investment portfolio.
While the liquor interests and Pioneer account for about three-quarters of Zeder’s portfolio value, it is encouraging to note that there is a lot happening in other parts of the investment silo.
The portfolio statement for the six months ending August shows Zeder has been actively upping its stakes in a number of smaller counters.
Aside from the well-documented topping up in both KWV and Capevin, Zeder upped its stake in four other agribusinesses – so much so that the R120m cash pile from end-February this year has all but been depleted.
Most significant, in my opinion, is Zeder bumping up its stake in fruit exporting company Capespan from 14.6% to 21.7%.
In terms of value (increasing Zeder’s holding from R55m to R81m) it’s not earth-shattering, but – as I’ve pointed out previously – Capespan shares are currently trading way below intrinsic or reasonable value.
It would appear Zeder is buying as much Capespan as it can lay its hands on, and I wonder what its shareholding position will be at the end of February 2011.
In this regard I note that while Zeder’s cash has been spent, the company does have a R300m funding facility for additional investments.
Zeder also pushed its stake in Agricol from 20.35% to 25% which, interestingly, saw the value of the investment more than double to R24m (so something must be gelling there). The stake in Suidwes was increased too.
I don’t know how Zeder does it, because I’d imagine ordinary investors really would battle to get decent lines of stock in Capespan, Agricol and Suidwes. Its tenacity in scooping up lines of scrip is an undoubted attraction for retail investors.
But what is more intriguing is what Zeder’s role will be in the future of Pioneer Foods – which will probably soon be hobbled with fines for transgressions in bread and milling pricing it would never have contemplated two years ago.
Zeder played a central role in unlocking value in the old KWV Limited by splitting up the archaic structure. It is now sitting pretty, with KWV Holdings showing encouraging operational progress and a valuable strategic stake in Distell via Capevin, for which there will no shortage of buyers - including Distell’s biggest shareholder, Remgro [JSE:REM].
Pricing in excitement
But what could transpire at Pioneer? I suspect Zeder – via its influential 41% holding in Kaap Agri, the biggest shareholder in Pioneer – could force through some structural changes to cope with any balance sheet burden brought about by the pending fines.
I would not be surprised if some of the bigger non-staple food divisions like Ceres Beverages (could KWV be a suitor?) and maybe the poultry business are put up for sale - leaving Pioneer to concentrate on its traditional strengths in bread (Sasko) and cereals (Bokomo).
Whether Pioneer would still need to be recapitalised after such a restructuring, I suppose, depends on the quantum of the fines. But perhaps Zeder, as it has done previously, would be partial to underwrite a rights offer – especially if such an exercise consolidated its control of the food giant.
Clearly, there’s a lot that's happening (and can happen) at Zeder.
While some might argue that it is a hazardous exercise to price excitement into a share, I reckon buying this unique counter at a 15% to 20% discount to the portfolio’s see-through value could yield a bountiful harvest in the longer term.
- Fin24.com
RDP housing recovery boosts Calgro
Leani Wessels
Property developer Calgro M3 has benefited from the stellar recovery shown by the lower segment of the construction market.
Johannesburg - AltX-listed affordable property developer
Calgro M3 (Calgro) reported solid interim results as the
lower segment of the market showed a stellar recovery
from the residential building slowdown, its CEO said on
Friday.
Calgro CEO Ben Pierre Malherbe said the Breaking New
Ground (BNG) and affordable housing segment recovered
faster than the upper end of the market, due largely to
households’ ability to access home loans and the high
demand for housing.
“End-user bonds are coming back - there are 100% bonds
again,” he said. “Government is also stimulating the
market with subsidies; there are indications that 2011
will be a very good year for us.”
The group reported an increase in headline earnings per
share to 3.61 cents from a loss of 2.93c for the
six months to end-August. Operating costs were reduced
by 17%.
Calgro developments include affordable housing units in
Lenasia, Riverlea and Klippoortjie in Gauteng.
According to Malherbe the biggest opportunities for
Calgro lie within the ‘gap’ market.
This market consists of households earning between R3500 and R15 000 per month. It is estimated there are between 600 000 and 800 000 homes needed for this market.
“The opportunities we’re seeing are also in the social
housing and rental market which are coming back,” said
Malherbe.
The government’s infrastructure spend before the World
Cup indirectly benefitted the group – the Rea Vaya
busses and BRT made certain areas more accessible and
boosted consumers’ interest in living in these areas,
Malherbe said.
Malherbe said the group’s pipeline of work is solid.
The group has increased its cash base significantly from
R1m to R31.2m. Malherbe said it would be cautious on
acquisitions and expansion into other provinces.
Now we all know that a 15% to 20% discount on an investment trust is pretty much par for the course. In fact, discounts of over 40% are not that uncommon – and some readers may remember dismissive valuations placed on Venfin (before the Vodacom Group [JSE:VOD] stake sale) and Brimstone Investment Corporation [JSE:BRT] (before the Life Healthcare Group Holdings [JSE:LHC] transaction).
So does a discount of only 15% mean Zeder is fully valued?
I would argue "no", because I don’t think Zeder can be classified as your typical passive investment company structure.
For one thing, Zeder is a specialist investment vehicle that dabbles in deep value situations in the agrisector. Basically – and I trust I am not oversimplifying Zeder’s strategy – the firm buys shares in companies where the unlisted share price markedly discounts the underlying tangible assets/investments.
While it is often not easy to pick up large parcels of shares in former cooperative companies, Zeder has done awfully well to build up meaningful stakes in a variety of value-laden contenders.
The funny thing though, is that Zeder’s investment strategy at listing in 2006 – if I recall correctly – stated that over the long term no investment would exceed 20% to 25% of the portfolio value, and neither would Zeder acquire more than a 20% to 25% stake in any one company.
I think this was put on record to placate farmer shareholders in the various former cooperatives, who might initially have been somewhat suspicious of the intentions of the suits from Stellenbosch.
But there has since been a considerably veering away from that initial strategy. I’m not being critical; actually, the development enhances Zeder’s status as a mover and shaker in the agribusiness sector.
Although not its biggest investment, Zeder’s flagship holding is the old KWV Limited, which now is broken into a R215m (or 31%) holding in KWV Holdings and a R552m (37%) holding in Capevin Holdings (which taps into JSE listed Distell Group [JSE:DST]).
The old KWV components comprise 37% of Zeder’s total portfolio – although individually Capevin is about 25% and KWV Holdings just over 10%.
The 41% stake in Kaap Agri (which is the biggest shareholder in Pioneer Food Group [JSE:PFG]) is worth over R800m – representing almost 40% of Zeder’s investment portfolio.
While the liquor interests and Pioneer account for about three-quarters of Zeder’s portfolio value, it is encouraging to note that there is a lot happening in other parts of the investment silo.
The portfolio statement for the six months ending August shows Zeder has been actively upping its stakes in a number of smaller counters.
Aside from the well-documented topping up in both KWV and Capevin, Zeder upped its stake in four other agribusinesses – so much so that the R120m cash pile from end-February this year has all but been depleted.
Most significant, in my opinion, is Zeder bumping up its stake in fruit exporting company Capespan from 14.6% to 21.7%.
In terms of value (increasing Zeder’s holding from R55m to R81m) it’s not earth-shattering, but – as I’ve pointed out previously – Capespan shares are currently trading way below intrinsic or reasonable value.
It would appear Zeder is buying as much Capespan as it can lay its hands on, and I wonder what its shareholding position will be at the end of February 2011.
In this regard I note that while Zeder’s cash has been spent, the company does have a R300m funding facility for additional investments.
Zeder also pushed its stake in Agricol from 20.35% to 25% which, interestingly, saw the value of the investment more than double to R24m (so something must be gelling there). The stake in Suidwes was increased too.
I don’t know how Zeder does it, because I’d imagine ordinary investors really would battle to get decent lines of stock in Capespan, Agricol and Suidwes. Its tenacity in scooping up lines of scrip is an undoubted attraction for retail investors.
But what is more intriguing is what Zeder’s role will be in the future of Pioneer Foods – which will probably soon be hobbled with fines for transgressions in bread and milling pricing it would never have contemplated two years ago.
Zeder played a central role in unlocking value in the old KWV Limited by splitting up the archaic structure. It is now sitting pretty, with KWV Holdings showing encouraging operational progress and a valuable strategic stake in Distell via Capevin, for which there will no shortage of buyers - including Distell’s biggest shareholder, Remgro [JSE:REM].
Pricing in excitement
But what could transpire at Pioneer? I suspect Zeder – via its influential 41% holding in Kaap Agri, the biggest shareholder in Pioneer – could force through some structural changes to cope with any balance sheet burden brought about by the pending fines.
I would not be surprised if some of the bigger non-staple food divisions like Ceres Beverages (could KWV be a suitor?) and maybe the poultry business are put up for sale - leaving Pioneer to concentrate on its traditional strengths in bread (Sasko) and cereals (Bokomo).
Whether Pioneer would still need to be recapitalised after such a restructuring, I suppose, depends on the quantum of the fines. But perhaps Zeder, as it has done previously, would be partial to underwrite a rights offer – especially if such an exercise consolidated its control of the food giant.
Clearly, there’s a lot that's happening (and can happen) at Zeder.
While some might argue that it is a hazardous exercise to price excitement into a share, I reckon buying this unique counter at a 15% to 20% discount to the portfolio’s see-through value could yield a bountiful harvest in the longer term.
- Fin24.com
RDP housing recovery boosts Calgro
Leani Wessels
Property developer Calgro M3 has benefited from the stellar recovery shown by the lower segment of the construction market.
Johannesburg - AltX-listed affordable property developer
Calgro M3 (Calgro) reported solid interim results as the
lower segment of the market showed a stellar recovery
from the residential building slowdown, its CEO said on
Friday.
Calgro CEO Ben Pierre Malherbe said the Breaking New
Ground (BNG) and affordable housing segment recovered
faster than the upper end of the market, due largely to
households’ ability to access home loans and the high
demand for housing.
“End-user bonds are coming back - there are 100% bonds
again,” he said. “Government is also stimulating the
market with subsidies; there are indications that 2011
will be a very good year for us.”
The group reported an increase in headline earnings per
share to 3.61 cents from a loss of 2.93c for the
six months to end-August. Operating costs were reduced
by 17%.
Calgro developments include affordable housing units in
Lenasia, Riverlea and Klippoortjie in Gauteng.
According to Malherbe the biggest opportunities for
Calgro lie within the ‘gap’ market.
This market consists of households earning between R3500 and R15 000 per month. It is estimated there are between 600 000 and 800 000 homes needed for this market.
“The opportunities we’re seeing are also in the social
housing and rental market which are coming back,” said
Malherbe.
The government’s infrastructure spend before the World
Cup indirectly benefitted the group – the Rea Vaya
busses and BRT made certain areas more accessible and
boosted consumers’ interest in living in these areas,
Malherbe said.
Malherbe said the group’s pipeline of work is solid.
The group has increased its cash base significantly from
R1m to R31.2m. Malherbe said it would be cautious on
acquisitions and expansion into other provinces.
