Libstar must make good on its margin promises
Perhaps Libstar should not have gone public, as some commentators have said.
Certainly, the consumer packaged-foods group that owns brands such as Lancewood cheese and Denny mushrooms and makes ready-meals for Woolworths, was mispriced when its sponsors took it to market at R12.50 a share, in the process raising R3bn, half of that to pay down debt.
But at least investors now have a maiden set of numbers with which to work – which may have been one of the reasons the company had a positive day on the JSE on Tuesday, while most other SA Inc stocks fell in a heap.
While operating profit fell almost 14% to R223m, and that partly due to foreign exchange losses, Libstar has been able to drive through positive growth in volumes, as well as an increase in organic sales.
It will need to make good on its margin promises though. Its gross profit margin fell to just under 21%, partly due to lower mushroom prices.
But the company says price increases it has passed on to customers, as well as cost cuts, have restored margins to previous levels and these should be maintained to the end of the year. Any disappointment here will take a further toll on the share price, now down more than 20% since its May debut.
Libstar’s earnings are weighted towards the second half of the year and the crucial Christmas trading period, which, given SA’s recession, may be bleak.
Investors will also want further clarity on Libstar’s ability to pay dividends, which, unsurprisingly given its debt, were not forthcoming in the half-year.
South Africans can now invest in Russian commercial property, but is it a good proposition given the myriad risks and lack of information about that market?
Raven Property Group, which owns logistics warehouses in the world’s largest country by area, reckons it has a good investment case for South Africans and has announced it will inwardly list on the JSE on Monday.
The group has yet to approach institutional fund managers, so there is speculation it will try and grow its SA investor base gradually.
It says it has built up a strong profile, thanks to a listing on the London Stock Exchange. The group has a market capitalisation of £252m (R4.92bn).
But it is still hard to see how this company will attract SA institutions, considering that many of them have lost billions already due to the dramatic loss of value in the Resilient stable of companies, which have been at the centre of allegations around the trading of their shares. Understandably, fund managers would be cautious about any new potential listings.
Garreth Elston, a fund manager at Reitway Global, says Raven offers exposure to one of the most volatile economies in Europe. He says there is a lack of transparency about commercial real estate data in Russia and companies have to abide by US and EU sanctions.
But there may well be some interest from investors with some appetite for risk.
Raven says it offers choice for investors who want exposure to the Russian economy, which grew 1.5% in 2017 and is expected to breach 2% in 2018.