Three JSE turnarounds: Tiger Brands, Nampak and Accelerate Property Fund

Turnaround stories always seem to capture the imagination of the market. The reason is quite simple, really: when turnarounds go well, the potential returns are very high.

This is the classic risk/reward trade-off that underpins that entire market. The flip side of this coin is that turnarounds can go badly, with a poorly performing company disappearing into obscurity despite the best efforts of new management teams and recharged balance sheets.

Turnarounds can also go sideways for a long time. In an environment such as South Africa, with a high cost of capital, this is just a less dramatic way of going backwards. Investors are looking for real growth when they take equity risk, not a flat share-price chart.

In the past week on the JSE, we saw a few turnaround updates that show what is possible when these things go well.

We begin with the strongest example of all: the mighty roar of Tiger Brands.

A special turnaround: Tiger Brands

Tiger Brands just declared a R4-billion special dividend as part of releasing results for the year ended September 2025, adding to the R1.8-billion special dividend that it declared for the interim period. When you add on billions more for ordinary dividends and share buybacks, it’s clear that there’s no shortage of cash at Tiger Brands.

Getting to this point wasn’t easy and was by no means guaranteed. Management had to take decisive action by focusing on the underlying businesses where Tiger Brands has a clear path to success, or a “right to win” as they call it in corporate language.

A good analogy would be the process of deciding which sports to play at school. If winning matters to you, then you’re going to pick the sport where you have the right combination of natural talent and passion for the game. It wouldn’t make sense to focus on sports that you’re either naturally bad at, or don’t care about at all.

It seems logical that companies should take the same approach to their underlying exposures, yet far too many management teams would rather attempt to play every sport and build scale for the sake of scale, even if the end result is a business that loses at many things instead of winning at just a few. Bigger isn’t always better.

Under the current management team, Tiger Brands has been carefully deciding which sports to play and which ones to walk away from. This is why revenue growth of 2.7% for the year ended September looks so modest, as both disposing of businesses entirely and reducing exposure gradually put a handbrake on group revenue growth. It’s also worth noting that we are in a deflationary environment for food prices, so this is a further drag on revenue growth.

But here’s where the magic happens: group operating income jumped by 35% for this period as the benefits of focus were realised. This is what really counts, as you pay dividends with profits, not revenue. Far too many businesses (and investors) have learnt this lesson the hard way.

The segmental story is even more interesting. As impressive as the 27% increase in operating profit in the milling and baking business is, it looks positively boring compared with the rampant 236% growth in the grains business. In fact, after such a step-change in profitability, the grains business is now similar in size to the milling and baking business in terms of profits.

The good news continues as you read further into the financials. Aside from the strong balance sheet that now puts Tiger Brands in a net finance income position rather than incurring net finance costs, there’s also fantastic exit velocity based on the second half of the year being much stronger than the first half in terms of operating margin. If it can keep that up, the cash should continue flowing to investors.

Can Nampak break higher?

Nampak just delivered a new 52-week high in response to the release of a trading statement for the year ended September 2025. It then turned lower, so the debate is around whether it can break into a new range and push higher. Based on recent earnings, it seems to have a good chance!

The year-on-year growth rates are rather silly. Headline earnings per share (HEPS) from continuing operations more than tripled, despite interim HEPS being up only 5%. This has less to do with an acceleration in profits this year and more to do with a distorted base period, so the percentage move isn’t worth focusing on. Instead, it’s more sensible to consider expected HEPS from continuing operations for the year of between R101 and R107.

We don’t have all the details yet, of course, with results expected out on Monday, 8 December. They will certainly be worth digging into. But at a current share price of R535, the current P/E multiple is hardly demanding at around 5.1x. The 52-week high is R570.

Keep an eye on Accelerate Property Fund

Property sector turnarounds are unusual relative to other sectors, as it should theoretically be quite difficult for a property fund to get itself into serious trouble. The journey for Accelerate Property Fund has been far from ideal, though, with current management trying to manage the numerous legacy issues and the simple fact that Fourways Mall is way bigger than it should be.

I recently took a long position here, mainly because it felt to me like the valuation was too low relative to the progress being made by management. When the circular for the disposal of the iconic Portside building in Cape Town was released, a huge sigh of relief could be breathed around the balance sheet. This was my trigger for going long, as the market was still largely ignoring the story.

So far, so good – the share price has rallied sharply in the past couple of months. There’s still a long way to go, but a trading statement for the six months to September reveals that the fund has swung from a distributable loss to distributable earnings of between R56-million and R58-million. This means that it is moving forward rather than backwards, a key shift in momentum in any turnaround story and a position that I’m very happy with thus far. DM