Table of Contents
Executive Summary............................................................................4
Outlook ......................................................................................................................................4
Valuations...................................................................................................................................4
Risks ..........................................................................................................................................5
Report road map.................................................................................6
Overview of the report ...............................................................................................................6
Earnings overview ..............................................................................8
TBS – solid growth expected from diverse earnings base.........................................................8
AVI – near-term earnings growth challenging on cyclical drag...................................................8
PFG – issues to constrain re-rating .............................................................................................9
Valuation............................................................................................10
Tiger Brands Ltd (TBSJ.J): Buy; Target price 17500c ...............................................................10
AVI Ltd (AVIJ.J): Hold; Target Price 1950c ...............................................................................10
Pioneer Food Group Ltd (PFGJ.J): Hold; Target Price 3200c ...................................................12
Financial and return analysis ...........................................................13
Analysis of key financial metrics...............................................................................................13
Competition issues vs issues of competition ................................14
Brands ................................................................................................16
It’s all about # 1 or 2 .................................................................................................................16
The impact of soft commodity volatility ........................................17
A question of brand strength....................................................................................................17
Food inflation is rolling considerably from higher levels...........................................................17
Soft commodity volatility reinforces # 1 or 2 brand importance ..............................................21
The threat of private label................................................................23
African growth opportunities ..........................................................26
The last frontier? .......................................................................................................................26
Tiger Brands has placed strategic importance on African expansion.......................................27
AVI has highest current exposure and brand portfolio best suited to expansion.....................28
Pioneer’s ‘foreign’ growth market is South Africa....................................................................28
Tiger Brands: Strength in diversity .................................................29
Outlook ....................................................................................................................................29
Valuation ..................................................................................................................................29
Risks ........................................................................................................................................29
Enviable track record with strong shareholder-value focus......................................................31
Margin improvement ................................................................................................................31
Tiger Brands International .........................................................................................................33
AVI – Cyclical earnings drag ............................................................37
Outlook ....................................................................................................................................37
Valuation ..................................................................................................................................37
Risks ........................................................................................................................................37
AVI EBIT/earnings more cyclically exposed than peers............................................................39
Divisional review.......................................................................................................................40
I&J: better positioned than in the past; inherent cyclical fishing dynamics remain .................42
Fish is a scarce resource; illustrated by TAC declines..............................................................44
Pioneer Foods Group........................................................................46
Outlook ....................................................................................................................................46
Valuation ..................................................................................................................................46
Risks ........................................................................................................................................46
Key points ................................................................................................................................48
Business unit disclosure – more opaque than listed peers ......................................................50
Pepsi – third time lucky?...........................................................................................................52
Annexure A: FAS ...............................................................................56
Annexure B: Key brands...................................................................58
Tiger Brands.............................................................................................................................58
AVI ...........................................................................................................................................59
Pioneer Food............................................................................................................................60
Annexure C: Primary research .........................................................61