I felt just a little diminished at a family function on the weekend. Because we are quite a diverse and extended family in Cape Town, I think outsiders are often prepped with the briefest character sketch. So, on meeting, I usually get: “Ah, you’re the journalist”, followed by the cursory: “Where’s the rand going?” One of my younger cousins, though, got a far more intriguing introductory inquiry: “Which brother are you? The one bitten by the shark?”
Damn, I have war stories too — though being headbutted by a jellyfish in the Gamtoos River mouth in 1986 is hardly a ripping yarn.
To regain some heart, I participated in a couple of bouts of extreme sports at the spanking new padel courts opened up just outside Kommetjie. Our little village still doesn’t have a big brand supermarket, a franchised coffee shop or a banking precinct — but we have two padel courts in a distinctly rustic setting. There are rumours that a further two are on the cards, which is certainly justified by the constant foot traffic I saw on Sunday.
As luck would have it, in my haste to make our “exhibition” match I did myself some harm. Leaping onto my motorbike (the KTM is uncommonly tall, even for a six-footer) I did not quite get the old leg over, banging my kneecap into the steel carrier on the back of the seat. I didn’t half curse.
Slapping on a knee guard seemed to stanch the bleeding while I flayed around the padel court. Spilling blood on the new Astro turf might have seen the invites dry up rather rapidly. But that vicious KTM capping, coupled with the extraordinary amount of genuflecting in padel, has caused my right knee some terrible distress. I have a disturbingly stiff ache in the centre of the kneecap.
I fear the worst. And with my wife having tapped out the hospital plan on her knee last month, I will need to find a temporary remedy — aside from early morning immersions in the kelp beds.
I’m unlikely to get much balm from the local equity market in the run-up to the general election — though I could kick myself for not perching on Astral Foods early last month. Even the surfeit of special situations on the JSE look as if they will take more time to unfold.
Agribusiness investor Zeder is probably past its sell-by date and continues its slow grind to complete wind-down. At least the grind has been lubricated by a series of special dividends. Though I doubt deals will be struck for the remaining investments before midyear, the market has deemed it wise to narrow the discount to the collective value of the two remaining investments to about 20%.
The big value play is seed and agrochemicals business Zaad, which is still nowhere near justifying what it has invested in various specialised operations in Africa, the Middle East and Eastern Europe in recent years. Zaad, which is geared to the gills, reported much-depleted headline earnings of R65m for the half-year to end-December. Zeder said the profit slump stemmed mainly from chemicals business Farm-Ag International, which was caught out by a sudden fall in raw material prices.
Zaad, which is geared to the gills, reported much-depleted headline earnings of R65m for the half-year to end-December
Lower raw material prices would normally be a positive development. But early ordering of imported raw materials from China and India to circumvent ongoing snags at local ports proved costly. The sudden (and sharp) decline in raw material prices meant Farm-Ag had to sell its higher-cost inventory at markedly lower margins to cling on to market share. Hopefully this is a one-off that will wash out of Farm-Ag in the second half — noting that the other businesses in Zaad fared largely in line with expectations.
Zeder took a fair value writedown of just R42m on its 97.2% stake in Zaad. This left the seed and chemicals business valued at R2.342bn, representing a serious chunk of Zeder’s R2.7bn market value. Tossing in the net cash (after the latest dividend) and almost R100m in undisclosed net assets — and presuming Zaad is sold for close to its reflected value — investors are getting a R550m pome farming business for zip.
Unless you are intent on cultivating the image of a gentleman farmer, this hardly seems enough incentive to buy into Zeder’s value proposition. Interestingly though, Zeder CEO Johann le Roux said there were a number of offers for the group (as a whole) as well as individual assets. A group sale would conclude Zeder’s 18-year plough in the local agricultural sector — which, I might remind readers, started (and perhaps started to end) with the old KWV Group.
My question is whether Zeder would consider selling off assets individually in Zaad which, other than Farm-Ag, includes Netherlands-based Bakker Brothers, May Seed in Türkiye, Agricol and some interesting East African operations. At the group’s brief investment presentation, Le Roux noted: “We do have options on individual assets ... and if that’s the right way to go and there is a higher value realisation for shareholders, then that’s what we’ll do.”
Individual asset sales, however, would mean it could take much longer to release the full value at Zeder. Perhaps parent company PSG Group would look at pitching an offer to minority shareholders if Zeder’s market value crimps markedly after several asset sales. However, I have always fantasised about Zaad listing on an international bourse where its longer-term potential might be more apparent to investors with a greater knowledge of agribusiness themes.
PSG Capital and Rabobank have been appointed as co-advisers to consider any Zaad-specific approaches and — this is interesting — “potentially embark on formal processes where appropriate”. Netherlands-based Rabobank specialises in deals in the agricultural and food sector. I assume it will network wider investor interest in Zaad.
Maybe I am being hopeful for a listing. But if the offers — be they for the entire group or just selected bits — don’t stack up, I just don’t see Zeder, or PSG for that matter, taking a discounted price on slow-germinating Zaad.
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