Tjaart Kruger, the recently appointed CEO of consumer goods conglomerate Tiger Brands, brings a lot to the table. I had coffee with him a few weeks ago, literally a stone’s throw from my old Bohemian digs in Mowbray where I briefly enjoyed all that the vibrant late-1990s could offer.
Kruger is exceedingly affable, and talks with incredible authority about pretty much all aspects of the local food sector. He gives an entertaining and enlightening investor presentation too, engaging frankly on issues that have dogged Tiger for more than a few years. It’s still early days, but I think Tiger has the right leader to ensure the group claws back market share, fattens margins and puts the group on the prowl again.
That said, it’s abundantly clear that Kruger is an unyielding taskmaster. Senior management are being worked hard. He quips that his management team, assembled for the recent investor presentation, look like they are in their 60s, though most are under 40 — “They’ve done 10 years of work in one year.” Who said tweaking Tiger’s big brands would be easy?
Still, the pay-off from these strenuous efforts will hopefully be more evident in 12 to 18 months — a contention supported by a markedly firmer share price that is well off the R188 levels seen at this time last year. Kruger believes Tiger is already ahead of schedule in terms of finding a sharper operational focus — even hinting that a few more deals (read: disposals) should pan out soon. These will include brands already slated for sale — such as Maize King and King Food (probably by the first half of 2025), and perhaps others too.
The big thrust is in the bread market, where Kruger’s former employer, Premier, has baked in solid market share gains. Tiger, according to Kruger, intends shifting its philosophy from running a slew of small bakeries to having bigger bakeries. The group already has approval for its first “super bakery”.
Kruger is determined not to give too much away at this juncture, but he does say Tiger has “cracked the next level of what big bakeries are”. He adds: “It’s not something I have done before” — which is intriguing, remembering Kruger’s breadwinning role at Premier.
What is also encouraging is that this significant slab of capital expenditure looks likely to be funded through operational cash flows and the proceeds from disposals. In the interim, Tiger is wasting no time in improving yields from its existing bakery network, jettisoning unprofitable routes and making improvements at depots.
Kruger concedes that Tiger’s price-volume balance had got out of kilter. “We’d been discounting a bit too much, and did not have the right balance. We walked away from volumes to get that equation right.”
Our Brokers’ Note this week — courtesy Shaakir Salie of Aeon Investment Management — makes an interesting call on Tiger and its rival AVI. I have to wonder if AVI holds any interest for a stalking Tiger? I just can’t see Tiger looking at Libstar or RFG … or even RCL Foods (unless, maybe, the pet food segment came up for sale).
We’d been discounting a bit too much, and did not have the right balance. We walked away from volumes to get that equation right
— Tjaart Kruger
AVI, on the other hand, would offer Tiger more category-leading (and margin-enhancing) brands in tea, coffee and snacks. AVI’s fashion, cosmetics and fishing interests would hardly be coveted by Tiger. No doubt Tiger has enough on its plate to preclude any short-term thoughts about large acquisitions. But I can’t imagine Tiger’s brains trust has not chatted about AVI’s snacks and beverages brands …
Shifting away from scurrilous speculation, Super Group took a refreshingly determined decision to let go of its Australian subsidiary, SG Fleet, at what looks like an attractive price. I was quite taken aback — but maybe I have seen too many executive teams arguing to retain operational bulk for reasons that don’t always serve the best interests of shareholders.
Quite simply, Super Group’s board felt the offer was an opportunity to cash in on a “significant premium to the estimated value of SG Fleet as reflected in Super Group’s share price”. They argued, for good measure, that the proposed transaction “potentially demonstrated the significant undervaluation by the market of the remainder of Super Group’s business”.
With that in mind, hopefully a chunk of the SG Fleet sale proceeds will, aside from easing gearing, be used to repurchase the undervalued Super Group shares. One wag suggested a well-fortified Super Group should acquire Combined Motor Holdings. I can’t see that panning out, quite frankly.
Finishing with the JSE’s minutiae, I don’t suppose too many readers were eagerly snapping up Nictus — an insurance provider with a furniture retailing side hustle — in mid-January when the share price was dribbling along at 46c. Back then the market value of Nictus was just R24m — which, unbelievably, was less than the R36m the company earned in “investment income” for the six months to end-September. Net cash flow for the interim period was close on R70m.
Clearly there is value to be had for investors who are patient enough to reel in small lines of stock … and probably a decent dividend due for the full financial year. But it’s hardly going to be action-packed. In fact, the listing remains a curious throwback to when it was separated from its larger Namibian parent company — which retained a listing on that country’s stock exchange but opted to scurry off the JSE. Maybe it’s time to consider a “rebundling” deal, if only to attempt to improve liquidity and market awareness?
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