Interactive Investor

Insider: Billionaire backs this African firm

29th December 2015 15:34

Lee Wild from interactive investor

Just three days before Christmas, a non-executive director at Zambeef Products spent almost half-a-million pounds on a stake in the agri-business which operates in Zambia, Nigeria and Ghana. If previous share-dealing is anything to go by, he's a canny operator.

Billionaire Adam Fleming's Rhodora trust paid £494,000 for 6.2 million Zambeef shares at an average price of 7.975p, taking his interest in the company to 15.4 million shares, or 6.2%.

Clearly, Fleming has watched the share price slump to record lows and thinks a bottom must be near. Zambeef traded at just 5.4p on 25 November. The previous month they were worth twice that, and as much as 16.6p in August.

There's plenty to worry about at Zambeef though. It reports in US dollars, which means any drop in the value of the Zambian Kwacha hurts the numbers when translated back into the American currency. As a result, analysts predict a huge decline in dollar-reported revenues and profits in 2016.

Yet, Fleming - his uncle was James Bond novelist Ian Fleming and great-grandfather Robert founded aristocratic investment firm Robert Fleming & Co - has called things right in the past. In early 2014, he sold millions of shares when the market price was around 33p.

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Raymond Greaves at joint house broker finnCap thinks Fleming is making a smart move. After full-year results in November, he said: "We have updated our valuation and reduce our target price to 15p, but note that the shares appear very cheap, trading at 6x FY 2016E earnings, a double-digit free cash yield and at about 25% of book value."

A "strong" performance at Zambeef's core cold chain food products division was also welcome, and its core businesses, which also include dairy, have made a decent start to the financial year ended 30 September 2016.

Zambeef remains a high-risk play, so widows and orphans should steer clear. Fleming is, however, an incredibly successful businessman, and it will be interesting to see whether he's got this right.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.