Market watchers on Monday were still mulling over implications of the sudden retirement of Pioneer Foods CEO Phil Roux.
With Pioneer poised for a recovery in financial 2018, it is surprising that highly rated Roux – only 52 years old – chose this delicate juncture to step away.
Now it seems the chances of meaningful corporate action at Pioneer are slim, and that the company might for the foreseeable future focus intensely on fattening margins and market share in key brand categories.
While Pioneer’s share price was steadier on Monday, the share price of controlling shareholder Zeder Investments looked distinctly wobbly.
The share finished at a 12-month low and came awfully close to dipping below the level of 600c.
Zeder, an agribusiness investment company, is effectively a proxy for Pioneer, which makes up close to 60% or about 400c a share of the sum-of-the-parts valuation.
Events at Pioneer might see investors re-examining Zeder’s value proposition. The discount offered by Zeder’s share price on the latest sum-of-the-parts valuation is about 13%. That’s not huge by investment company standards — but with the value of the Pioneer stake diminished, there could be more attention focused on Zeder’s other (larger) components.
One way of looking at Zeder is that at the prevailing price the major stake in recently listed retailer Kaap Agri comes for free. But it’s more likely that punters who firmly believe Pioneer is set for a fatter profit in financial 2018 will view a weakening Zeder share price as offering an attractively discounted entry point to the food brands conglomerate.
Hyprop Investments’s guidance of 7%-9% dividend growth in the 2018 financial year is highly disappointing, although it may signal that the stellar performance run enjoyed by listed companies is coming to an end.
Hyprop owns some of the most-liked South African shopping centres. These include Hyde Park Corner, The Mall of Rosebank, Canal Walk and Clearwater Mall.
It has been a highly reliable dividend player in listed real estate. For a few years, double-digit dividend growth has been common and it reported that in the year to June, it grew 12.1%. So, for the 2018 June financial year to show between 25% and 42% worse relative dividend growth, is a big setback. The company faces pressure from weaker retail sales across its local portfolio, but many other shopping centre owners are also feeling the pain.
Texton Property Fund, Tower Property Fund and Emira Property Fund all reported dwindling dividends in the latest financial results season, before rebasing any dividends.
CEO Pieter Prinsloo said on Friday that various African economies in which Hyprop was invested had started to enjoy some growth. Hyprop also owns 60% of UK-based Hystead. This company houses its European assets, which include malls, in southeastern Europe.
These assets contributed R101.8m to Hyprop’s distributable earnings, benefiting from positive trading conditions and healthy consumer spending, said Prinsloo. This makes the expansion into southeastern Europe a success, with net income from the portfolio exceeding budget.
• Neels Blom edits Company Comment (blomn@bdlive.co.za)
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