Our opinion on the current state of BID

Bidcorp, having been spun off from Bidvest in June 2017, stands out as a diversified international food company with operations across 34 countries, marking its prominence in the global foodservice industry. The strategic move to separate from Bidvest was aimed at unlocking shareholder value, a goal that appears to have been successfully achieved, given the company's robust performance and solid reputation as a blue-chip, rand hedge investment. Remarkably, Bidcorp generates approximately 95% of its income outside South Africa, positioning it as a key player in the international market with a strong hedge against rand volatility.

Bidcorp's operational strategy focuses on the wholesaling and delivery of "fit-for-purpose" product ranges, a niche that the company has effectively capitalized on, ensuring sustained growth and market penetration. For the six months ending on 31st December 2023, Bidcorp reported a 24% increase in revenue and an 18.6% rise in headline earnings per share (HEPS), showcasing its operational efficiency and the robust demand for its offerings across its diverse markets.

The company's performance highlights include an exceptional showing in Europe, where nearly every business unit reported solid growth in both revenue and margins despite challenging conditions. While revenue growth in Australasia moderated, Australia and New Zealand continued to deliver strong trading performances. The UK market saw good volume growth, attributed to previous contract wins and acquisitions, though profitability was somewhat affected by lower margins and higher costs. Emerging Markets, including South Africa, contributed positively to the overall performance, although challenges in Greater China somewhat impacted results.

Bidcorp's strategic approach to growth through acquiring "bolt-on" companies has further strengthened its market position, enabling the company to expand its footprint and diversify its revenue streams effectively.

From a technical perspective, Bidcorp's share price exhibited a steady upward trend until June 2023, followed by a period of sideways movement before entering a new upward trend. Currently trading at a P/E ratio of 21.24, the company's valuation reflects its status as a blue-chip, rand-hedge entity, indicative of investor confidence and the anticipated continued performance.

Given the general recovery of the global economy, Bidcorp is well-positioned to leverage its international presence, diversified operations, and strategic growth initiatives to continue delivering strong financial results. Investors looking for exposure to the foodservice sector and seeking a reliable rand hedge investment would find Bidcorp an attractive proposition, aligning with expectations for its sustained success in the international market.

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Snapshot: 4/2024

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