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Tiger Brands is a stock we hold for a few clients in local portfolios, in relatively small size. We started accumulating them in 2005 as the South African economy grew strongly on the back of high commodity prices. Our theory was that aspirational consumerism would lead middle class customers to trade up from basic foodstuffs and household products to the branded-goods that Tiger sells.
To recap, look at this list of top notch brands that they sell: Albany, All Gold, Beacon, Black Cat, Crosse & Blackwell, Doom, Energade, Fatti's & Moni's, Golden Cloud, Ingram's, Jeyes, Jungle Oats, Koo, Maynards, Mrs Balls, Oros, Perfect Touch, Purity, Tastic and Tinkies.
That strategy worked out well, and the Tiger share price went from R100 a share in 2009 to R440 at the end of 2017. Since then it's been a mess. They bought and then wrote off the value of a huge acquisition in Nigeria, and stumbled as a listeriosis outbreak affected their meat processing business. Weak consumer demand undermined sales. The share price is now at R230 a share.
Tiger delivered a "mixed" set of results yesterday for the six months ended March 31, 2019. Headline earnings per share were down 12% and revenue from continuing operations fell by 2% to R15.4 billion. In the good news column, they declared an ordinary dividend of 321 cents per share as well as a special dividend of 306 cents per share, as a result of the sale of part of Oceana to Brimstone sale. The rest of Tiger's Oceana shares were distributed to shareholders (if you have some Oceana in your account, we think that you should sell them).
So, what to do? Our view is that South Africa is on the verge of an economic revival, thanks to a more settled political outlook. That should give our consumers a boost, and make our listed company shares more attractive to foreign investors. Just be brave and hold on to stocks like these for now.