Quantum: What’s cracking with the JSE’s cheapest share?

Quantum Foods – producer of poultry, eggs and animal feeds – went ex-dividend on Wednesday, which sent the share price skittering nervously down.
After paying a sumptuous ordinary and special dividend from the rich proceeds of a bumper period for the egg business, Quantum’s share was always going to retreat – especially as trading conditions for the financial year ahead are no longer as appetising.
The intrigue now lies in where the Quantum share price settles ahead of the mid-February AGM, with the market having to make ongoing reassessments of the short- to medium-term prospects.
Quantum is one of the cheapest shares on the JSE with a trailing earnings multiple of less than three times. Even if earnings halve in the year ahead, the forward market rating is not nearly at demanding levels.
The business – chaired by food sector doyen Andre Hanekom and managed by astute CEO Hennie Lourens – is a lean and mean operation. But profit prospects, especially on the poultry side, will be diminished by the recent surges in the maize price.
Significantly, the share price of the JSE’s “big bird” Astral Foods, which also went ex-dividend on Wednesday, have come off markedly in recent months as cost issues are weighed up by the market.
In addition, Quantum has also conceded that dynamics being experienced in the egg market are significantly different to what was experienced 12 months ago. In short, there are now more than enough layer hens in place to ensure that local supply will exceed demand – which will no doubt have a fairly drastic effect on prices.
Clearly there’s going to be lots to cluck about in the weeks ahead, especially if a predator decides Quantum – which has Zeder Investments as a significant shareholder – offers incredible value.