Report
Jiten Bechoo ...
  • Pratish Soni

Tiger Brands | Walking the talk

We believe Tiger Brands diverse portfolio of strong brands, provides its management with a good platform to accelerate top line growth and earnings. Management needs to regain credibility by:

1. Further consolidating its portfolio by disposing of underperforming assets. The Deli Foods and UAC Foods Nigerian businesses are currently under review.

2. A more effective turnaround strategy for the VAMP business post the Listeriosis crisis.

3. Defending market share in core categories such as bread, rice and breakfast cereals.

4. Driving innovation to increase mix towards premium, higher margin products.

The company's new organisational structure is supportive to TBS's transformation initiatives. The completion of recruitment for a consumer insights engine is bringing fresh perspectives as well as energy to the company. Suitable revisions to remuneration policies will also align stakeholder and management interests. A performance driven culture should see the company rapidly respond to evolving trends in SA consumption.

We set a one-year target price of R261/share. We estimate a total return of 26% (including a 5.2% dividiend yield, augmented by a special dividend which adds 1.4%). Accordingly, we keep an OUTPERFORM rating. We caution that outstanding Listeriosis litigation may lead to significant liability, as the current insurance policy does not cover TBS on all bases. TBS is in a net cash position currently which will buffer the company in the event of adverse legal outcome.
Underlying
Tiger Brands Limited

Tiger Brands is a manufacturer of branded food products. Co. provides a range of categories spanning food, home and personal care products. Co. operates through:The Grains division, which includes maize and wheat milling, bakeries, sorghum beverages and breakfast, rice, oats and pulses, and pasta; The Consumer brands division, which provides groceries, snacks and treats, beverages, value added meat products, out of home, home, personal care and baby; The Exports and International division, which includes, among others, Tiger Brands International Langeberg & Ashton Foods, and Chocolaterie Confiserie Camerounaise; and Nigeria business, which comprises of Deli Foods and Dangote Flour Mills.

Provider
Avior Capital Markets
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.

Analysts
Jiten Bechoo

Pratish Soni

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