Avior Capital Markets - RFG Holdings (196N) Rhodes Food | Fundamentals have bottomed

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Avior Capital Markets

Jiten Bechoo

Rhodes Food | Fundamentals have bottomed

Rhodes Food Group (RFG) released a voluntary trading update for the five months to February 2018, guiding for H1 '18 diluted HEPS to decline by c.42% yoy to c.29.5cps. RFG's exposure to fruit pulp and concentrate exports has caused the disappointing group performance over the past six months. H2 '18 should see a rebound in export profits and group earnings (+37% yoy by our estimate). We expect the worst of the strong ZAR to be in the base, USD prices are rising, and input costs are falling. RFG also has an increasingly strong domestic business, which is gaining share in its core categories. RFG also has optionality to accelerate growth as Africa ex-SA export demand improves. RFG will increase its leverage to consumer up-trading and shield itself from competition as management increase the mix of higher value-added products in its portfolio. The RFG group earnings growth profile of 16% CAGR to c.172cps in FY '21 is attractive compared to sector peers.

29/03/2018 12 EN

Underlying

RFG Holdings

Rhodes Food Group Holdings Limited is engaged in production of convenience meal solutions in fresh, frozen and long life product formats. The Company's operating segments include Regional and International. It also manufactures fresh and frozen ready meals, pastry-based products, canned jams, canned fruits, canned and bottled salads and vegetables, canned meat, fruit purees and concentrates, juice and juice products and dairy products. Its geographical segments include Republic of South Africa and Kingdom of Swaziland. Its Regional segment includes Fresh products and Long life products. Its International segment includes Long life products. Its businesses include Long Life Foods, Long Life Beverages, Commercial and Fresh Foods. The Long Life Foods include meat products, pineapple, salads and pickles. The Long Life Beverages business consists of juice products, and pulps and purees. The Fresh Foods division produces pies and pastries, dairy products, snacking and baking, among others.

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ZAE000191979 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Jiten Bechoo

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Rhodes Food | Fundamentals have bottomed

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