Avior Capital Markets - SA Investment Strategy | Bottom of the food inflation cycle: Prefer Food Retailers over Food Producers

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Avior Capital Markets

Ayan Ghosh

SA Investment Strategy | Bottom of the food inflation cycle: Prefer Food Retailers over Food Producers

SA Food Retailers remain one of the most unloved sectors in domestic fund manager portfolios. Although food inflation has surprised on the downside YTD, we expect food inflation to have bottomed, with incipient price pressures evident in meat. Historically, rising food inflation trends have buoyed food retailers and we see a contrarian opportunity to remain Overweight on Food Retailers (Spar, Shoprite) in the SA consumer space. SA real retail sales averaged 1.3%y/y between Feb-Apr 2019, , with general dealers (food retailers) among the biggest contributor to the increase. However, we remain Underweight on Food Producers (Tiger Brands, AVI) where our discussions with management suggest continued volume and pricing pressure.

28/06/2019 10 EN

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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

Ayan Ghosh

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SA Investment Strategy | Bottom of the food inflation cycle: Prefer Food Retailers over Food Producers

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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