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Zeder (ZED) will be the stock in focus: (Price at time of writing: R6.25) - Date: 17 April 2016
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Background and overview of Zeder (ZED):
Zeder is the agricultural arm of well known investment and value unlocking firm PSG group, who owns roughly 35% of the share capital of Zeder. Zeder is one of those stocks you buy and hold and hold and hold and hold. The agricultural sector is not a fast moving one, so potential investors in Zeder should not be expecting fireworks. But rather a low risk slow moving asset over time. The perfect counter balance to some of the more volatile shares out there.
The following is available from Zeder's website:
THE AGRIBUSINESS INDUSTRY
Zeder invests in the “agribusiness” industry. Agribusiness is a broad descriptive term referring to a range of activities and processes involved in modern food and raw material production. It encompasses all the procedural and practical services and products associated with the word “agriculture”: farming of every sort, machinery, distribution, processing, marketing, financing and so on. The success of this industry is key to the future of the global population which continues to grow and urbanise. Through our strategic core investments, Zeder is geared to play a significant part.
WHERE DO WE COME FROM?
Zeder came into existence as the brainchild of PSG Group’s leadership team. From as early as 2004, the board of PSG, led by its founder entrepreneur, Jannie Mouton, sought a vehicle through which to consolidate its diverse holdings in the broad agribusiness industry. Thus, Zeder Investments came into being and listed on the JSE in 2006, with a colourful basket of holdings in agribusinesses across Southern Africa. Historically, Zeder’s strategy was to take non-controlling interests in a wide spectrum of agribusiness investments. See our Track Record for more detail on our historical investments.
WHERE ARE WE GOING?
The world is changing in exciting and challenging ways. With growth in the global population and increased urbanisation, a number of major themes are shaping consumer behaviour. Naturally, the agribusiness industry is heavily impacted and shaped by this context: new farming regions are being developed for the first time, technology is increasingly integral to the optimisation of the production chain and high input costs and environmental awareness are challenging traditional business models to be more sustainable.
“We are well represented across the agribusiness value chain, and are always investigating new opportunities to expand and diversify.”
Zeder is proud of its strong position in this ever-growing and developing industry. We have learnt a great deal, gained priceless experience and built up strong relationships in the years since inception. We have ultimately emerged with an investment approach that supports our growth strategy. Through our core investments, we are well represented across the agribusiness value chain, and are always investigating new opportunities to expand and diversify. Where once, our engagement in our investments was non-controlling and passive, we are increasingly more involved in our core investments. We are passionate and optimistic about the African continent and are looking to grow businesses where we see potential, sustainability and key management. For more on Zeder visit their website at www.zeder.co.za
The following is available from Zeder's website:
THE AGRIBUSINESS INDUSTRY
Zeder invests in the “agribusiness” industry. Agribusiness is a broad descriptive term referring to a range of activities and processes involved in modern food and raw material production. It encompasses all the procedural and practical services and products associated with the word “agriculture”: farming of every sort, machinery, distribution, processing, marketing, financing and so on. The success of this industry is key to the future of the global population which continues to grow and urbanise. Through our strategic core investments, Zeder is geared to play a significant part.
WHERE DO WE COME FROM?
Zeder came into existence as the brainchild of PSG Group’s leadership team. From as early as 2004, the board of PSG, led by its founder entrepreneur, Jannie Mouton, sought a vehicle through which to consolidate its diverse holdings in the broad agribusiness industry. Thus, Zeder Investments came into being and listed on the JSE in 2006, with a colourful basket of holdings in agribusinesses across Southern Africa. Historically, Zeder’s strategy was to take non-controlling interests in a wide spectrum of agribusiness investments. See our Track Record for more detail on our historical investments.
WHERE ARE WE GOING?
The world is changing in exciting and challenging ways. With growth in the global population and increased urbanisation, a number of major themes are shaping consumer behaviour. Naturally, the agribusiness industry is heavily impacted and shaped by this context: new farming regions are being developed for the first time, technology is increasingly integral to the optimisation of the production chain and high input costs and environmental awareness are challenging traditional business models to be more sustainable.
“We are well represented across the agribusiness value chain, and are always investigating new opportunities to expand and diversify.”
Zeder is proud of its strong position in this ever-growing and developing industry. We have learnt a great deal, gained priceless experience and built up strong relationships in the years since inception. We have ultimately emerged with an investment approach that supports our growth strategy. Through our core investments, we are well represented across the agribusiness value chain, and are always investigating new opportunities to expand and diversify. Where once, our engagement in our investments was non-controlling and passive, we are increasingly more involved in our core investments. We are passionate and optimistic about the African continent and are looking to grow businesses where we see potential, sustainability and key management. For more on Zeder visit their website at www.zeder.co.za
Financial review:
ZED is a holding company and not really an operating entity. This does make valuing the stock a little harder than operating entities, as cash flows, earnings and expenses cannot be used in the same was as operating entities to value a share. For holding companies one would look at the value of net assets (and net asset value per share) in order to get an indication of the worth of the companies assets per share.
The graphic below shows the contribution of ZED's holdings to their total Sum of the Parts (SOTP). As can be seen from the pie chart by far the biggest contributor to ZEDs SOTP is their holding in Pioneer Foods.
It's clear from the pie chart above that the main contributor to ZED's NAV is their holding in Pioneer Foods (PFG). 60% of their overall assets is made up by their holding in Pioneer. This is a lot smaller than a few years ago when it made up well over 75% of their assets. It's good to see that there is a lesser dependence on one holding to carry the value of Zeder. Reason for the drop in PFG's contribution to ZED's NAV is twofold. On the one side ZED has actively been investing in other companies, buying out all Capespan shareholders and increasing their holdings in companies such as Zaad. The other reason being a significant drop in PFG's share price in recent months has seen its overall worth drop substantially and by virtue of that so has its worth in ZED's portfolio dropped.
ZED's 2nd largest contributor to its NAV is Capespan, which is a large fruit exporter, exporting large amounts of fruits to the Asian and European markets.
The industry that ZED is in, is a slow moving one, and investors should not expect fireworks when buying into ZED. They follow a very similar approach to their major shareholder and their founders PSG Group (PSG). The investment philosophy is buying undervalued quality assets at depressed prices and waiting for these to be valued at their true value. This is a very safe, but long term investment approach.
We like the industry they in and the shares they do hold, but are realistic about expectations of future share price performances. This is a slow and steady stock. The type an investor buys and forgets about for years.
ZED's 2nd largest contributor to its NAV is Capespan, which is a large fruit exporter, exporting large amounts of fruits to the Asian and European markets.
The industry that ZED is in, is a slow moving one, and investors should not expect fireworks when buying into ZED. They follow a very similar approach to their major shareholder and their founders PSG Group (PSG). The investment philosophy is buying undervalued quality assets at depressed prices and waiting for these to be valued at their true value. This is a very safe, but long term investment approach.
We like the industry they in and the shares they do hold, but are realistic about expectations of future share price performances. This is a slow and steady stock. The type an investor buys and forgets about for years.
Valuation
ZED's current Sum of the Parts (SOTP) as reported on their website at end 15 April 2016 is R8.71. We feel that ZED should trade at a 10% to 15% discount to these assets (as most holding companies trade at roughly 10% to 15% discount to their assets). We therefore value ZED based on its current financial results and their SOTP at between R7.40 and R7.83. So based on ZED's current share price we feel it offers great value to long term patient shareholders. We therefore recommend them as a buy.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question