CBH (CBH)

Previous Stock Tip These companies are all previous recommendations from the Red Hot Portfolio that I subsequently recommended and then sold from the portfolio at a later date. By no means are these companies intended to be buy recommendations for you to go out and invest money towards their shares. For the opportunity to start making serious money from the recommendations I am making now, just start your 1 month free trial! Initial Recommendation: RHPS Issue 91 / December 2008 Looking for a sure thing? Exploding consumer demand gives this share’s the potential to deliver 77.5% by this time next year A few days ago, I had a chat with the manager of the local Super Spar down the road from me. He told me that there was a noticeable shift in the buying habits of the public. People are avoiding more expensive products and buying cheaper ones – this trend goes for anything from breakfast cereals to meat. That got me thinking… so I asked him if this was the case for their entire group nationwide. He said yes – but it’s more pronounced in the less affluent areas. And, as my stomach rumbled for lunch, I just knew I was onto something good… That’s why I asked a well-respected food retailer what it had to say about this. This was its view: “The price of red meat is rising fast and is likely to continue to do so. There’s currently a swing towards poultry throughout the country.” As consumers shift gear, there’s an easy way to exploit this new trend Makes sense doesn’t it? When times are tough, people adjust their habits accordingly. There’s nothing wrong with that, but it presents us with an opportunity to capitalise on the situation. And here’s how: By buying Country Bird Holdings (or CBH for short). The company also told me poultry prices are starting to pick up as a result of increasing demand. Imports are down and this is adding to the rising price. Feed input costs are expected to remain constant for now, which, in turn, will add to the profit margins. If that wasn’t enough to peak my interest, I then noticed that directors have been buying shares in their company regularly in the last few months. Now isn’t that appealing… Management’s taken positive steps to improving its prosperity In September, CBH reported results that were lower than expected. But the share price anticipated this long in advance by falling really hard. The company says that, by the second half of next year, things will improve. On top of this, management’s engaged in a cost cutting exercise to improve efficiencies throughout the group. Significantly, the company also declared a dividend of 2.90c per share. So what we have here is a coming improvement in profits; a leaner, meaner company and a product favoured by the general public – all of which adds up to better times for the share price. But if that’s not enough to getting you dialing your stockbroker’s number, consider that the company’s expanding its operations in the animal feeds and protein diversification areas of its business. Plus, its increasing poultry consumption through its expansion into Africa. So far, CBH consists of Country Bird, Supreme Poultry, Nutri Feeds, Ross Africa, Silver Blade Abattoirs, Silver Blade Imports, Hollyberry Props, Ross Breeders (Zambia, Namibia and Botswana) and Webram. (But I must mention that CBH has nothing to do Country Foods – don’t get confused between the two.)
RHPS Verdict CBH is a neat company with strong future growth potential. It’s placed in just the right segment of the consumer market and the share’s price is at rock bottom. I expect this share to do very well in the long-term. We’re presented with a good entry point. The share may have fallen, but it’s flattening out and starting to recover, while the rest of the market continues to fall out of bed! This implies that this share’s doing its own thing and isn’t really at risk in terms of the overall market mayhem. I vote this share a buy at current levels of around 169c to a target of 300c in a year. Please note, however, the share’s moderately liquid right now. So don’t use it as a trading instrument. Update 1: RHPS Issue 92 / January 2009 RHPS Recommendation: BUY CBH: What a performer! CBH has been in the portfolio for only a few weeks and we already have a fantastic profit of 24%. It should continue upwards with normal pullbacks along the way. Update 2: RHPS Issue 94 / March 2009 RHPS Recommendation: HOLD CBH: Solid results and a great dividend CBH released a mix bag of interim earnings. Turnover was up strongly – over 30% – but headline earnings were down because of higher input costs (a result of the high maize price). However, its input costs are falling. Even better news was the declaration of a very big interim dividend of 9c. This will be paid to shareholders on the 22nd of April 2009. Companies don’t jack up dividends unless they’re very confident. The market liked the results and pushed the price up. It’s now roughly 36% above the December price at which it was tipped. Update 3: RHPS Issue 96 / May 2009 RHPS Recommendation: HOLD CBH: Expect cash in your pocket soon There’s nothing new to add – although you can expect some weakness after the 21st April when the dividend gets paid. Update 4: RHPS Issue 98 / July 2009 RHPS Recommendation: HOLD CBH: Still in talks… CBH hasn’t made any more announcements about its planned deal with Sovereign Foods. As it stands, the deal is a win-win situation for both. Update 5: RHPS Issue 98 / August 2009 RHPS Recommendation: SELL CBH: Let’s bank a quick gain CBH has made a good return of 53.5% since inclusion in our portfolio eight months ago. Despite the corporate action between Afgri, Sovfood and CBH having played out, CBH’s share price hasn’t moved up any further. This suggests the easy money’s been made.

The past is not a guide to future performance. Trades in stocks recommended by Red Hot Penny Shares are small company shares. By their nature, such investments can be relatively illiquid and, as a result, hard to trade. This makes such shares more risky than other investments. Please seek independent financial advice if necessary. Profits from share dealing are a form of income and subject to taxation. Levels and bases of, and reliefs from, taxation are subject to change, and depend on individual circumstances.