Pioneer Foods (HOLD, TP ZAR 162/share) - One step forward, two steps back; Downgrade to HOLD
​Self-help story of margin improvement takes a back seat in FY 17e post weak H1 17A as EBIT margin is down to 2012 levels.
FY 18e to show improvements, but EBIT margin will likely re-set at a lower level (ACe +340bps y/y to 11.7% in FY 18e).
Downgrade to HOLD on lower estimates and lack of short term catalysts. New TP ZAR 162/share (-11%).
Weak FY 17e sets a low base. FY 17-20e HEPS CAGR at 27% looks strong, but confidence needs to be restored to re-rate.
Pioneer Food Group is a Fast Moving Consumer Goods (FMCG) group based in South Africa. Co. is engaged in the manufacturing of food, beverages and related products for human and animal consumption. Co.'s operations are organized along three main divisions: Essential Foods (wheat and maize products, trades in rice, beans, lentils and dried vegetables); Groceries (cereals, rusks, biscuits, cake mixes, baking aids, instant mash potato, dried fruit products, nuts, spreads, dehydrated vegetables, salads, fruit juices, carbonated soft drinks and fruit concentrate mixture); and Pioneer Foods (tomato sauces and ketchup, frozen foods, seafood tinned products, tinned food, instant meals and noodles).
Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa.
Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research.
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