Picture: ISTOCK
Picture: ISTOCK

Kaap Agri, a perennially profitable retailer mainly to the farming sector, will make its debut on the JSE on Monday.

The company will be the second large retail listing on the JSE following Dis-Chem, which made its market debut late in 2016. Kaap Agri’s market capitalisation could be more than R4bn.

The company, which has PSG-aligned entities Zeder Investments and Dipeo Capital as 39.8% and 20% shareholders, respectively, will not be looking to raise fresh capital at listing. But the prelisting statement makes it clear that the JSE listing will provide access to capital to grow the business both organically and by acquisitions.

The prelisting statement said Kaap Agri had diversified its business model over the years — largely derisking itself from the traditional cyclical nature of the agricultural environment.

The company’s operations span seven provinces (with the biggest operational footprint in the Western Cape) as well as a presence in Namibia. This comprises more than 100 retail sites and over 190 business units.

Kaap Agri trades mainly under the Agrimark retail brand, but also operates fruit and vegetable-packaging specialist Pakmark, a filling station business The Fuel Company (TFC), nine bottle stores under the Liquormark brand as well as irrigation and grain storage operations.

The prelisting statement discloses that Agrimark has more than 70 branches with product offerings targeting farmers, professionals, building contractors, DIY enthusiasts and the public. In recent years, Kaap Agri has seen strong growth in TFC – which incorporates convenience store brand Expressmark and coffee shop outlets under Fego Caffé. Expressmark offers TFC an alternative to other convenience offerings like Caltex Fresh Stop, Engen One Plus or Total La Boutique, while The Fego Caffé "To Go" brand is a coffee shop brand.

Kaap Agri has 25 retail fuel and convenience service stations as well as 14 service stations. The prelisting statement confirms plans to raise this footprint and the possibility of introducing a commercial partner as a minority shareholder in TFC.

Negotiations are under way with a potential party, but no binding agreements have yet been concluded.

Kaap Agri will also head to the JSE with a strong set of interim results under its belt. Recently released figures for the half-year to March showed interim revenue at R3.46bn with gross profit coming in at R578m on an enviable margin of 16.7%.

Recurring headline earnings of R147m was posted, translating into headline earnings of 208c per share. This suggests earnings for the full year to September 2016 of 298.5c per share will comfortably be exceeded this financial year.

An interim dividend of 29.4c per share was declared with Kaap Agri CEO Sean Walsh indicating that improved earnings growth was expected for the next six months with the business on track to achieve its strategic medium-term targets.

Kaap Agri’s OTC (over-the-counter) trading platform was closed earlier in June, with the company’s shares last traded at R55. That would imply a trailing earnings multiple of 17 times — but a forward multiple closer to 15 times.

The statement said immediate growth would be secured by increasing market share in certain water-intensive areas and expected growth regions where dam and water supply expansion projects were under way.

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