PICK OF THE MONTH: Tongaat Hulett
Efficient market hypothesists argue that the market is always right when it comes to the pricing of a company’s shares.But is that always the case?
Efficient market hypothesists argue that the market is always right when it comes to the pricing of a company’s shares. But is that always the case? Not when it comes to SA’s largest listed sugar producer, Tongaat Hulett, believes Warren Jervis of Old Mutual Investment Group. “Tongaat Hulett should be trading at about R150/share, yet it is only at R121,” says Jervis. “I am surprised that the market is not getting it.” What the market appears not to be getting is that the worst drought to hit Southern Africa in more than three decades has been broken in Tongaat Hulett’s three key growing regions: KwaZulu Natal (KZN), Mozambique and Zimbabwe. It sets the scene for the sugar group to enjoy at least two years of vigorous production increases and surging profitability. “The dominant theme in the next two years will be falling unit costs of production,” says Tongaat Hulett CEO Peter Staude. “Our marginal cost of additional production is extremely low.” Of the group’s sugar milling costs, ...
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