Value? Based on what? Realisable asset value? Certainty of growth in earnings per share. Stupendous spot HEPS ratings? Cash generation? Value is "WHAT YOU GET FOR WHAT YOU PAY.". It is not some ethereal floating "share price" relative to where that price has been before.
My fundamental metrics are simply: DY, ROE,ROA, PE,P/Nav,D:E,Current ratio, quick ratio & PEG. If an established company ticks 7 out of the 9 boxes it is put on my special shortlist. ARL are going through a bad patch and hence the opportunity. By the way Thresh, no need to shout.
Amplification of a single point is NOT really shouting. I might maintain that you are shouting your ticker codes. ARL is going through more than a "bad patch." We might be looking at a fundamental shake-out in the chicken game - at an international level. All of the industry players are taking a hit. More importantly - ARL is a failure in terms of the metrics/measures you are using to test it. So I ask again - where is the value? SOV went through this 6 years ago and is now down 1-(5/22*27/80) = 97% - time value = minus 15% on a fixed per share rating. Granted - it is a much smaller business - but it is a very similar creature. In fact - I would say it is better VALUE (sorry - shhh.)
Anyway - I just have serious misgivings about the future for these businesses going forward. They cannot "grow" themselves out of a pinch. They are subject to competition from just about every country out there and they are cheap and simple to start (low barrier to entry.). There biggest inputs - grain and power are beyond their control and pretty much out of control in general in South Africa. They also have have no real brand strength nor any real intellectual capital.
You make some good points and there is no doubt that, the poultry industry lacks pricing power. Margins of 2.5% are not sustainable so in ARL's case, I see there feed division underpinning the group earnings if they can maintain margins at 7% or higher particularly in the African export arena. Diversification in their services sector could also play a more meaningful role.One must keep in mind that in the SADEC countries, chicken accounts for over 70% of the protein consumption and with increasing populations, more of it will be required.The main contributor to margin erosion are the imports from Brazil & Europe, which producers are heavily subsidised, is our govt. going to do something about it? I am banking that they will.
BUT... you are counting on the "other" SADEC nations - our government is not (cannot) help with pricing there. "FEEDS" require grain (and other cereal) inputs. Shocking dollar price movements in that commodity. Our local farmers are under siege - I wouldn't count on them as a growth industry to absorb these feeds. Forget Brazil - I believe we are now being murdered by Eastern European and North American imports. This is not a quality investment proposition. ASTRAL should moves ALL production to Angola, Zambia etc. This place is an industrial wasteland in the making. Isn't it pathetic that we can't compete with chicken prices from the USA. As for that subsidy story - why doesn't out venal ANC subsidise food production? To busy cooking up competition fines, I suppose. Certainly not n America. Dumping - sure. BUT that has and will always be with us. At this point we'll have to "agree to disagree." I wouldn't touch ASTRAL with the proverbial barge pole
I can only speak for what I've seen in KZN, and being fairly close to that industry, the bleeding ain't over yet. This past year I've seen players across the spectrum, from egg, day old chicks and broiler producers fold, and some them had been going for generations (60 years plus).Although there maybe a little relief in a few months time, due to the lower maize and soya futures, one must remember Brazil is on course for a bumper soya crop, in excess of 80mil tons, so if anything their cost of production will be further reduced, with the chance of continued "dumping". As for the animal feed side, no one in KZN is using their full capacity, the report from the" Animal Feed Producers Assoc" puts the figure at approx 70%, and why Afgri recently commisioned a feed mill in already an over crowded PMB, only they can answer that no brainer. I wouldn't be surprised to see a further fall once ARL post it's results.
The point is, they can route it through any country to avoid quotas. It is not so easy to limit imports from "ALL" countries - we cannot impose quotas on other SADEC countries at will for instance. Anyway, given our government's past record, the quotas will be more of an opportunity for venal forces to profit from distorting the system. Just look at the clothing import control debacle. No, I would rather steer well clear of this industry.