Our opinion on the current state of KAL Group(KAL)Previously, Kaap Agri, the KAL Group is an agricultural company owned 40.9% by Zeder, which is, in turn, 43.7% held by PSG.
The company operates through over 190 retail outlets offering a wide range of products and services mainly to the farming community.
Kaap Agri has seven divisions:
(1) Pakmark offers a wide range of packaging materials for the local and export markets, especially to the fruit industry.
(2) Agrimark has over 70 stores in South Africa and Namibia offering a wide range of animal feeds, gardening equipment, tools, outdoor and camping equipment, and pet accessories.
(3) Liquormark offers a wide range of liquor products from beers to wines, spirits, and mixers.
(4) Kaap Agri Mechanisation offers farming machinery and equipment.
(5) Wesgraan offers grain handling and management services.
(6) Expressmark supplies fuel, especially diesel, mainly to the farming community. It also has convenience stores.
(7) The Fuel Company (TFC) aims to be the market leader in the independent fuel retail market in South Africa.
The group's product diversity has reduced its exposure to weather conditions in the agricultural sector, especially in the Western Cape, but it remains essentially a retail outlet that focuses on the agricultural sector. As such, its results are impacted by the general level of consumer spending in South Africa and the state of the local economy as well as agricultural conditions.
On 4th October 2021, Kaap Agri announced that it had sold its 70.5% stake in TFC Properties for R446m.
On 19th January 2022, the company announced the acquisition of PEG Retail Holdings for R1.09bn. This acquisition increases the number of petrol stations which Kaap Agri has from 43 to 84.
In its results for the year to 30th September 2024, the company reported revenue down 3% and headline earnings per share (HEPS) down 9.2%.
The company said, "The profit after tax of the Group amounted to R451 million (2023: R480 million) while the gross assets decreased to R8,215 million (2023: R8,290 million)."
In an update on the 1st quarter to 31st December 2024, the company reported retail turnover up 2.3% and Agri turnover up 5.7%.
The company said, "An average 18% decrease in fuel prices impacted turnover but not trading profit. Fuel price gains were R5.2m lower YOY and Group fuel volumes increased by 0.7%."
Technically, the share broke down through its trendline on 6th January 2025 at 4952c and has since fallen to 4681c.
We see it as a well-managed company that has exposure to South Africa's retail environment, loadshedding, and also to the state of agriculture in this country. It has suffered with falling petrol prices recently.
We recommend waiting for the share to begin a new upward trend before investigating further. Issues surrounding expropriation of land without compensation have an impact on the company.
However, with a P:E multiple of 8.34, these risks look fully discounted. In its integrated annual report, the group has predicted that it will make over R1bn in pre-tax profits by 2025.
