Friday 17 April 2020

Analysis of ABF 2020

ABF, logo, 2018

Company: ABF

ISIN GB0006731235 | WKN 920876

Business: A British conglomerate with agriculture, agricultural products as well as retail. Currently they have five business segments: Sugar, Agriculture, Retail, Grocery and Ingredients. To find out more about their grocery brands then please click here and to find out about their businesses in general then please click here.

Active: Europe, Africa, USA and Australia. Heaviest in the UK and Ireland.

P/E: 16.7

Here you can find the previous analysis of ABF 208

The P/E of ABF is still a bit high but starts to be more reasonable at 16.7 and the P/B is significantly down with 1.6 however Graham would still not go for the company.

The earnings to sales have dropped down and is now at 6% and the ROE is at 9.5%. The book to debt ratio is very good with a ratio of 2.3.

Th yearly revenue growth rate has increased and is up at 4.3% which gives us a motivated P/E of around 13 to 17 which means that ABF is today fairly valued by the market today. 

The dividends are still low with only 2.4% which correspond to around 40% of their earnings which makes in comfortable. They pay out dividends twice per year and the recent events in the world might cause them to not pay out the second one.

Future: The five business segments are well aligned for the long term future of human consumption. The retail section with their very cheap garments will probably be under pressure every now and then but finding a bargain is unfortunately in humans nature so it will take a long time until that changes. Reading sustainability reports then Primark is actually ending up in the top categories so due to their low prices they are perceived to a "bad" company which in fact they are not.

Conclusion: Graham always said no to this investment and he still does. To be fair ABF start to look like a better investment today than what it ever was. The company is owned to 54% by the founding families investment company which should lead to stability but also potentially slow movements and slow to make decisions. I do not mind that. I will remain invested. I bought it based on all the shopping bags that I saw in Berlin and here in the UK with all their stores things are much more relaxed but the stores are still busy... well... they were before the pandemic at least which will have a negative impact on retail but the other segments will be deemed as necessity and there business will go on.

If this analysis is outdated then you can request a new one.

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