Bloomberg News

Rainbow, Astral Jump on Cheaper Valuations: Johannesburg Mover

March 26, 2012

Rainbow Chicken Ltd. (RBW) rallied the most in almost seven weeks and Astral Foods Ltd. (ARL) headed for the biggest gain in about six weeks on bets their discount to other South African food producers make the stocks attractive.

Rainbow Chicken jumped 3.1 percent to 15.20 rand, the most since Feb. 7, while Astral rose as much as 2.2 percent and closed 1.8 percent higher at 125.50 rand in Johannesburg, the biggest gain since Feb. 14.

Rainbow trades on 10.8 times reported earnings, while Astral is priced at a multiple of 10.9, below the FTSE/JSE Africa Food Producers Index (JFPPS)’s 15.3 times multiple. Tiger Brands Ltd. (TBS), South Africa’s largest food company, has a price-to- earnings ratio of 16.7, while AVI Ltd. (AVI), the country’s second- biggest consumer goods company, trades at 15.6 times reported earnings.

“I think if you are a little bit hesitant to pay those kind of PEs for Tiger Brands and AVI, and certainly there is a view that those stocks are looking a little dire in price, where does one go to look for food producer exposure,” Mohil Bandulal, head trader at Sasfin Securities, said by phone from Durban. “You have to look further down the line.”

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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