Ann Crotty Writer-at-large

Sovereign Foods’s recently released trading update has taken a lot of the lustre off what had been regarded as an attractive takeover offer. The R12 a share promised by Capitalworks, in conjunction with Sovereign management, looked remarkably generous compared with the R9 that had been offered by hostile bidder Country Bird Holdings (CBH) a year earlier. It now looks exceptionally cheap. Sovereign management is targeting earnings per share (and headline earnings per share) of at least 156c for the six months to end-August. Albie Cilliers, an investor who tracks the industry closely, reckons earnings for the full year will be significantly more than double this because trading in the second half is always considerably stronger than the first half. Traditionally, about two-thirds of profit is made over the festive season. Assuming full-year earnings of 400c a share, Capitalworks and management are getting the company on a price-to-earnings rating of just three times.In its trading sta...

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