In the emerging world, agriculture is increasingly a big business, as newly-affluent consumers demand more western-style food. Shares in Zambeef offer exposure to this growth story thanks to the company's presence in fast-developing Zambia, Nigeria and Ghana.
- Long track record in Africa
- Exposure to fast growing stable economies
- Recent acquisition to significantly boost revenues and profits
- Foreign exchange risk
- Volatile input costs
The company's shares were floated on the Alternative Investment Market (Aim) in June, but its history in Zambia stretches back more than 15 years. During that time it has developed a vertically-integrated business that incorporates meat, dairy and arable farming, processing meat and dairy products, through to a retail division that has 110 stores and butcheries in Zambia under the Zambeef and Shoprite brands, and its own fast-food Zamchick restaurants.
During the past six years, the company has expanded its retail presence into Nigeria and Ghana through the Shoprite regional supermarket chain, for whom it operates meat counters. It has also made its first move to start its vertically-integrated model in Nigeria with a lease on a cattle farm close to Lagos.
ZAMBEEF (ZAM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 45p | MARKET VALUE: | £112m | |
| TOUCH: | 42-45p | 12-MONTH HIGH/LOW: | 67p | 38p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 37p† | NET DEBT: | 21%† | |
| Year to 30 Sep | Turnover ($m) | Pre-tax profit ($m) | Earnings per share ($c) | Dividend per share ($c) |
|---|---|---|---|---|
| 2008 | 132 | 10.4 | 6.5 | nil |
| 2009 | 138 | -12.8 | -6.5 | nil |
| 2010 | 162 | 3.3 | 2.6 | 1.0 |
| 2011* | 176 | 8.6 | 4.0 | 1.0 |
| 2012* | 228 | 20.9 | 8.0 | 3.0 |
| % change | +30 | +143 | +100 | +200 |
Normal market size: 10,000 Market makers: 4 *Religare estimates †Pro-forma figures £1 = $1.596 | ||||
Zambeef benefits from its strong position in Zambia, one of sub-Saharan Africa's more stable countries. On average, Zambia's economic output has grown by 6.4 per cent in the past five years, while inflation has generally remained in single digits. Zambia also offers political stability and ideal conditions for farming, with plenty of fresh water and 60 per cent of its land classified as having potential for agriculture. It also benefits from two growing seasons a year. The Nigerian and Ghanaian economies have also demonstrated strong and stable growth in recent years.
Alongside its organic growth potential, Zambeef plouged $46m of the $55m proceeds from its Aim float into the acquisition of three farms in Zambia. These will give a huge boost to its presence in row crops, adding almost 47,000 hectares of which only 13,000 is already planted with soya, wheat, maize and jatropha. The output of the farms should benefit other parts of the group. For example, the additional soya input for the Zamanita edible oils business will reduce its need to buy in expensive palm oil, which restricted its profit margins; and the soya cake by-product can be diverted into animal feed. Also, the farms' wheat output should make Zambeef self-sufficient in wheat with some surplus for sale.
On top of this, management has ambitious plans for the development of the farms, and is piloting a palm plantation programme which, if successful, could lead to a further significant revenue stream.
