Our opinion on the current state of AVIAnglovaal Industries (AVI) is a generalised producer of consumer products in the food, cosmetics, and apparel sectors. It has a diverse range of very well-known South African brands such as I&J fish, Five Roses tea, Salticrax, Frisco, Provita, Yardley, Spitz, and Kurt Geiger. The company announced that it had sold its Australian seafood company, Simplot, for R633m, yielding a net after-tax profit of about R370m.
Over the decades, this share has undoubtedly been one of the best blue chips trading on the JSE. Its share price has shown a remarkable rise over the past twenty years. Twenty years ago, the share was trading for around 150c, and today it trades for about R65 at a cyclical low point. It has been a steady payer of dividends throughout that period. An investment in Anglovaal is an investment in the South African economy, but one which has shown itself to be virtually recession-proof until COVID-19. The coronavirus had an impact on consumer spending, and the AVI share price fell quite heavily because of this. More recently, it has been falling due to the crisis in Ukraine.
In its results for the year to 30th June 2024, the company reported revenue up 6,3% and headline earnings per share (HEPS) up 24,1%. The company said, "Gross margins recovered to pre-COVID levels - Strong cost control and efficiencies support operating leverage - Group operating profit for the year increased by 21,7%." On a P:E of 15,18 and a dividend yield (DY) of 4,53%, the share looks reasonably priced, even cheap.
In our view, this company will improve as the South African economy improves, and it should be accumulated on any significant weakness. We advised waiting for a clear break above its long-term downward trendline, which happened on 8th November 2023 at a price of 7418c per share. The share has subsequently moved up to 10429c.
