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Fair Or Fowl: Stock Picking For Chickens

by 5m Editor
23 May 2007, at 9:37am

SOUTH AFRICA - Chicken is becoming big business in South Africa, with structural income gains pushing increasingly more consumers towards a protein filled diet, and health consciousness piquing the appetite for chicken amongst the well-heeled.

Though mindful of the risks inherent in the sector, investors in the poultry offering on the JSE Ltd are taken by the modest valuations of these companies and are confident that chicken demand will exceed local supplies for some time still.

Astral Foods and Rainbow Chicken continue to dominate the realm of listed chicken stocks; Sovereign Foods is a smaller and less geographically spread option, as is the newly listed Country Bird. While Rainbow shareholders mull over the buy-out offer from Remgro, Afgri says it is considering a separate listing of its Daybreak broiler business.

Based on industry conditions and company valuations, analysts and portfolio managers see opportunity in these stocks, with most favouring the stalwart Astral Foods and - all else being equal - Rainbow.

Chicken run

Theo Botha, member of the Stanlib industrial research team, says domestic demand for chicken is growing in the region of 6% per annum, which outstrips the performance of other proteins on the market.

This growth will continue to be supported by rising income levels - which enable consumers to introduce more protein to their diets - by health concerns, and by our still-low per capita consumption of chicken compared with other economies.

Source: MoneyWeb

5m Editor