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Transcript:
We spoke a little bit earlier about Freeworld. I think that business is very well positioned for economic recovery - the results they have demonstrated in this tough environment are satisfactory. Some of the metrics you can bring to value the business such as price to book ratio suggests there could be an interesting story here. The net asset value of the company is about R14 a share - today you’re paying just over R7 to own those assets so you’re paying about 50 cents in the rand for the assets. Having said that I would caution that a large portion of those assets are intangibles - it’s brand names and goodwill that’s attributable to the product names the business owns. It’s a very powerful cash generator - it’s essentially un-geared relative to what things might look like in this type of industrial business. Their gearing to equity is in the region of 25% or 30%. I would imagine that in a normalised economic environment this business can produce earnings of about 120 cents a share. That’s the number that we have three years out. If you apply an earnings multiple of 10 times I think that’s a fair estimate or a fair rating - that gives you R12 a share or if you use a price to book multiple of 1.25 times which is our measure then you get over R16 a share. So somewhere between R12 and R16 a share for a company that you are paying just over R7 for at the moment - I think that’s a very reasonable prospect on a three-year view.

Broker:
Adrian Saville, Cannon Asset Managers

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