THE BOTTOM LINE
Astral Foods: Even this tough old bird came in for a plucking
Despite a strong trading update, investors marked down the price of the poultry operator’s shares
Even the JSE’s “big bird”, Astral Foods, can’t wing it in this jittery market. Astral – Africa’s biggest poultry operation – issued an upbeat trading statement on Wednesday, indicating that earnings for the full year to end September would be up at least 80%.
The trading update is not terribly surprising since trading conditions in the poultry sector have turned for the better – at least from the period when the sector was beset with not only prolonged drought conditions (which pushed up feed prices) but also an outbreak of avian influenza.
In short, Astral expects headline earnings to be at least 85% up on the previous year – implying a bottom line figure of around R35/share.
Notwithstanding the strong trading update, investors marked down the price of Astral’s shares.
And it’s not like group’s shares are “expensive”. Astral’s shares trade on a forward earnings multiple of just seven times, and dangle a mouth-watering forward yield (assuming a two times dividend cover) of around 6.8%.
What might have spooked the market was the admission by Astral that poultry sales volumes and selling prices came under pressure towards the end of the 2018 financial year due to a weakening in consumer demand. The group cited increases in the fuel price and the VAT rate as negative influences.
Astral has proven over the years to be a tough old bird when it comes to weathering difficult trading conditions. Whether the share is offering great value at these levels is a question that investors may only be willing to answer once a more detailed trading statement is released.