BROKERS’ NOTES: Catch a Tiger by the tail, lock in flavour at AVI

Shaakir Salie, is a research analyst at Aeon Investment Management

BUY: Tiger Brands

After Tiger Brands’s financial 2024 results presentation last week, the food giant appears poised for a comeback. Under new CEO Tjaart Kruger, the company has made wholesale changes in management, corporate structure and operating methods. In particular, Tiger is leveraging Kruger’s wealth of experience at Premier to stabilise its bread division (which owns the Albany brand). While the recent results didn’t dazzle, the groundwork for recovery is clearly shown in the improvements made in the second half.

The share now offers attractive upside from a low earnings base, and a compelling valuation.

SELL: AVI

AVI, which along with Tiger has long been a staple on the JSE’s food board, has had a stellar run of late. Most notable among the group operations was Entyce Beverages, which holds brands such as Five Roses, Freshpak rooibos, Ellis Brown, Ciro and Koffiehuis, and posted 41% operating profit growth in the past financial year despite muted volume gains.

The stock’s 48% year-to-date return reflects this success. But its high valuation and elevated earnings base make it a strong candidate for profit-taking. While both Tiger and AVI will benefit from improving macro conditions, Tiger’s untapped potential outshines AVI’s current momentum. We’d suggest selling AVI to lock in gains.