Potential reversal playing out on Pioneer Foods

by , 10 August 2017
Potential reversal playing out on Pioneer Foods
Pioneer has been under tremendous pressure since releasing its results on 22 May 2017.

Its earnings miss was partly due to an unfortunate hedging strategy, weaker consumer demand and slower African sales.

That said, the aggressive sell-off now looks overdone.

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Pioneer now trades on a one year forward PE of 15.11x, which is lower than both Tiger Brands and AVI, and is only slightly above Rhodes Food Group.
 
Compared to its historical numbers, this is pretty cheap and no doubt a result of the pessimism pervading all SA focused stocks. After all 94.32% of Pioneer's revenue is generated locally.
 
But, considering the severity of the price action, more and more analysts could be forced to upgrade the stock. Last month, Deutsche Bank downgraded its 12 month target price from R170.00 to R160.00 per share (based on the weaker numbers) but upgraded its recommendation from "hold" to a "buy" (based on the current valuation).
 
At R141.29, this seems to be a classic case of "market over-reaction". I suspect a short-term price normalization could be on the cards.
 
It’s for this reason I’m picking up a “long” position on the stock. My entry is set at R141.29, my stop loss is at R136.40. I have a first target set at R148.50 and a second target set at R156.50.
 
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...and start making money”
 
Right now, you are falling into the same trap as anyone who has EVER placed a bet online...
 
Do nothing and you will continue to LEAK CASH forever...
 
  
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Trade Details
 
Entry: R141.29
Stop Loss: R136.40
Target: R156.50
Gain: 107.65%
Risk: -34.61%
 
Instrument Specs
 
Company: Pioneer Food Group
Ticker: PFG CFD
Exchange: JSE
Margin: 10%
Gearing: 10x
 
Do you want to place this trade online?
 
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Regards,
 
Singa Gungqisa
Portfolio Manager, Rand Swiss
 
Editor’s note: You can get in touch with Singa at investorsclub.co.za and get real insider views like this from Rand Swiss with the South African Investor.




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