TigerBrands290714

EQUITY RESEARCH
Tiger Brands
Food
Buy
Medium Risk
29th July 2014
South Africa
BPI Capital Africa
Africa strategy to pay-off...
Analyst
Batanai Matsika
batanai.matsika@bpiafrica.co.za
Phone: +27 21 410 9019

2
Equity Research 4 Tiger Brands 4 July 2014
Africa strategy to pay-off...
(Initiating Coverage)
4 Tiger Brands is the largest branded FMCG player in South Africa. The company has
been pursuing a regional diversification strategy over the years, expanding its
footprint in Africa through acquisitions and JVs in countries such as Kenya, Ethiopia,
Cameroon and Nigeria. Currently, Africa (ex-SA) operations (including exports)
contribute c25% to revenues and we expect this to represent 31% by FY17F
. The
company has set a medium to long term objective to generate c35% of total revenues
from the rest of Africa.
4 We expect Tiger Brands to accelerate its earnings performance and register FY13-17F
revenue CAGR of 11%, fuelled mainly by increased performance in Africa, while SA
units should remain sound. Further, management has been looking to achieve
and maintain a consolidated EBIT margin of c15% (vs. 11.4% in FY13): we foresee
African operations to represent 26% of total FY17 EBIT vs. 14% in FY13, also
supported by a gradual improvement of DFM. We estimate Tiger Brands to record
18% EPS CAGR13-17F
and generate significant cash flow: our numbers are above
consensus.
4 Tiger Brands has a sound position in its domestic markets and offers a rising exposure
to the SSA consumer sector. The stock is currently trading at premium to its SA
peers on the short term, but it is at discount to its EM peer averages. We have set
our YE14 Price Target at R360/share, which represents 17% upside. Key triggers for
earnings surprises are (i) a sustainable turnaround at DFM, (ii) margin recovery
within the Groceries division; and (iii) robust growth in the rest of Africa. Key risks
include further restructuring hurdles in Africa and intensifying competition in the
domestic market. BUY.
Stock data
Price (R): 309 Price Target (R): 360
Nº of shares (m): 164 Bloomberg/Reuters: TBS SJ/TBS
Market Cap (Rm): 50 619 Market Cap (USD m): 4 602
Avg.Daily Vol. [R 'm] 180.4 Avg.Daily Vol. [USD 'm] 16.4
Net Debt/EBITDA'13 1.2 Free-float: 55%
EPS CAGR ('13-'17F
) 18% ROE'13: 20%
Major shareholders: PIC 9.8%; Colonial First State Global AM 9.2%; Tiger Consumer Brands 5.4%
YE June 2012 2013 2014F
2015F
2016F
2017F
EPS (R)* 16.7 15.7 19.0 23.3 27.5 30.9
P/E 19.5 19.6 16.3 13.2 11.2 10.0
Dividend Yield 2.6% 2.8% 3.2% 3.9% 4.6% 5.2%
FCF Yield 3.6% 3.8% 3.1% 5.8% 7.0% 8.0%
EV/EBITDA 13.2 12.2 10.7 9.0 8.2 7.7
(*) Adjusted for non-recurrent items.
Tiger Brands vs JSE Food Producers
Index vs JSE ALSI
Source: Bloomberg.
Available on our website:
www.bpiequity.bpi.pt, BPI Online,
and Bloomberg at BPAF.
Tiger Brands
Food
Buy
Medium Risk
29th July 2014
South Africa

3
INVESTMENT CASE
Tiger Brands is the largest branded FMCG Company in South Africa. The business started
as Tiger Oats in the 1930s and has developed into a dominant player in the food sector
through its portfolio of leading brands. The Group has been pursuing a regional
diversification strategy over the years, expanding its footprint in Africa through strategic
acquisitions and JV transactions in countries such as Kenya, Ethiopia, Cameroon and
Nigeria. Tiger Brands also has minority stakes in Oceana (South Africa), National
Foods (Zimbabwe), Empressas Carozzi (Chile) and UAC Foods (Nigeria). In FY13,
African operations (including exports) contributed 25% to revenue. However, the
underperformance of Dangote Flour Mills led to much less contribution at EBIT level.
Looking forward, we expect the contribution from the rest of Africa to increase from 25%
in FY13 to 31% by FY17F
. Tiger Brands has set a medium to long term objective to
generate c35% of total revenues in the rest of Africa.
FY13 Divisional Revenue Contribution Tiger Brands Shareholder Structure
Source: BPI Capital Africa, Company. Source: Company.
The key investment case of Tiger Brands lies on its growing exposure in the rest of Africa
and its sound cash flow generation in SA:
Africa Rising. GDP growth rates of c5.5% in SSA vs. c2.5% for SA reflect the significant
value that can be realized from the group's exposure in Africa. We note that Tiger
Brands has grown its revenues and EBIT at a FY09-13 CAGR of 7.2% and -0.4%,
respectively. In our view, SA is an ex-growth market given that its operations in the
country have registered FY09-13 revenue CAGR of 3.5% and FY09-13 EBIT CAGR of
0.4% compared to a FY09-13 revenue CAGR of 18% and EBIT CAGR of 28% for the
Exports and international operations (ex-Nigeria). Looking forward, we expect exports
and international operations (ex-Nigeria) to register a FY13-17F
revenue and EBIT
CAGR of 17% and 23%, respectively. We also project a FY13-17F
revenue CAGR of
15% for the Nigerian operations.

4
Comparison of Revenue Growth Comparison of EBIT Growth
Source: BPI Capital Africa, Company. Source: BPI Capital Africa, Company.
Dominant Position. Tiger Brands has a dominant position on the SA market and has a
strong portfolio of brands with #1 or #2 market share positions in key product lines. We
highlight that domestic operations still remain an important growth vector for the
business constituting 75% of group revenue. Overall, we expect SA operations to
register FY13-17F
revenue and EBIT CAGR of 9% and 11%, respectively.
Historic vs Forecast CAGRs FY17F
Divisional Revenue Contribution
Domestic
Operations
International
& Exports
(exc Nigeria)
Nigeria
Group
! " # $ % &# ! ' # $ % &#
Domestic
Operations
International
& Exports
(exc Nigeria)
Group
! " ( % &# ! ' ( % &#
Source: BPI Capital Africa/Company. Source: BPI Capital Africa/Company.
A defensive business model. Tiger Brands offers consumers a basket of staple and
discretionary products. We note that while the SA economy has been facing some
headwinds, the real expenditure on food and beverages has remained positive over
time. In addition, the group has a portfolio of defensive food products that cater from a
wide range of LSM groups. Therefore, the product mix enables the business to be
cushioned against adverse shifts in demand. Tiger Brands has historically maintained
recurring EBIT margins of between 12% and 15%.
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0%
5%
10%
15%
20%
25%
Turnover Gross
Profit
EBITDA PBT Atrib.
Income
CAGR 09-13 CAGR 13-17

5
Tiger Brands Revenue and EBIT Margin Progression EBIT Margin Comparisons: Tiger Brands Vs SSA & EM Peers
Source: BPI Capital Africa/Company. Source: Bloomberg.
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Management has maintained an aggressive growth strategy. We note that management
has driven a successful evolution of the business through various restructurings and
disposals. Examples include (i) the unbundling of healthcare interests which resulted
in Adcock Ingram, (ii) the sale of the dairy business (DairyBelle) in 2007 and; (iii) the
sale of Sea Harvest to Brimstone in 2009. However, we also note that the company has
been paying its "school fees" in its expansion in Africa, clearly visible with the acquisition
of DFM in Nigeria.
Strong cash generation capabilities. SA operations have allowed Tiger Brands to generate
sound cash flows, with FCF margin standing on average at 8.2% between 2009 and
2013. We expect this to be sustainable (projected FY17 FCF margin of 8.0%) enabling
it to: (i) develop and invest in new products, (ii) payout attractive dividends to
shareholders (FY17F
Dividend yield of 5.2%) and; (iii) pursue further value accretive
acquisitions. Tiger Brands has a sound track record of acquiring value accretive
businesses, particularly in the domestic market. Some of the businesses include Nestlé
South Africa confectionery business (2006), Soyatech (2006) and Crosse & Blackwell
(2009). We also recall that in 2008, Tiger Brands was considering to acquiring AVI
Limited.
Free Cash Flow
USDm FY08 FY09 FY10 FY11 FY12 FY13 FY14F
FY15F
FY16F
FY17F
Operating profit 2 527 3 477 2 828 3 371 3 479 3 080 2 790 4 649 5 362 5 959
Tax on EBIT -792 -984 -788 -951 -948 -797 -722 -1 203 -1 387 -1 542
NOPAT 1 735 2 494 2 040 2 420 2 531 2 283 2 068 3 446 3 975 4 417
add: depreciation 250 267 315 384 445 688 795 735 743 735
less: net working capital -914 -425 -113 -173 -592 -337 -465 -444 -396 -339
less: capex -870 -604 -634 -818 -480 -728 -850 -780 -784 -772
Free Cash Flow (Rm)-LHS 200 1 733 1 608 1 814 1 904 1 906 1 548 2 958 3 538 4 041
FCF Margin-RHS 1.1% 8.5% 8.3% 8.9% 8.4% 7.1% 5.1% 8.7% 9.5% 10.0%
Source: BPI Capital Africa/Company.

6
Analysis of Free Cash Flows Evolution of FCF Yield
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A financially sound entity. Tiger Brands has a Net debt/EBITDA of 1.2x that is expected
to decline to 0.1x in FY16F
on the back of strong cash generation. While ROIC bottomed
at 14% in FY13, we expect a gradual recovery to 18.7% in FY17F
. On a consolidated
basis, we estimate Tiger Brands revenues and EBIT to grow at a FY13-17F
CAGR of
10.7% and 17.9%, respectively on the back of strong growth in the rest of Africa and
sustained margin gains in key divisions.
Comparisons of ROIC Net Debt Evolution
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Source: BPI Capital Africa/Company.Source: Bloomberg.
In the meantime, we expect Tiger Brands to continue to face a number of constraints that
have been impacting negatively on its business:
Firstly, the group is facing slowing demand in its key market (South Africa). A protracted
economy in the domestic market negatively impacts Tiger Brands' profitability as
consumers cut back on consumption. Consumers in South Africa are currently under
pressure on the back modest macro conditions (GDP growth of c2.0%).
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7
Macro-economic Prospects in SSA Markets
2013 2014F
2015F
2016F
2017F
2018F
2019F
Cameroon 4.6% 4.8% 5.1% 5.2% 5.3% 5.4% 5.4%
Chad 3.6% 10.8% 7.3% 4.7% 3.6% 3.3% 3.5%
Ethiopia 8.0% 6.2% 7.8% 8.0% 8.0% 8.0% 8.0%
Kenya 5.6% 6.3% 6.3% 6.4% 6.4% 6.5% 6.5%
Malawi 5.0% 6.1% 6.5% 6.5% 6.2% 6.3% 5.9%
Mozambique 7.1% 8.3% 7.9% 7.7% 7.9% 7.8% 7.8%
Nigeria 6.3% 7.1% 7.0% 6.9% 6.9% 6.6% 6.7%
Rwanda 5.0% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
South Africa 1.9% 2.3% 2.7% 3.2% 3.0% 3.0% 3.0%
Tanzania 7.0% 7.2% 7.0% 7.1% 7.0% 6.8% 6.9%
Uganda 6.0% 6.4% 6.8% 7.1% 7.2% 7.3% 7.4%
Zambia 6.0% 7.3% 7.1% 6.8% 6.6% 6.3% 6.0%
Zimbabwe 3.0% 4.2% 4.5% 4.8% 4.1% 4.0% 4.0%
Source: WEO.
Secondly, the business is facing competitive threats in its markets. In South Africa, the
competitive landscape has become even more intense, with retailers such as Woolworths
and Shoprite driving own-label initiatives. The entry of Walmart through the acquisition
of Massmart has also increased competitive pressures. Tiger Brands also competes
with multinational groups such as Mondelez International, Unilever and Nestle. In the
rest of Africa, competition has largely been from cheap imports and informal traders.
Counterfeit products are also a serious constraint in countries such as Zimbabwe,
Mozambique and DRC.
Informal Market in Lagos, Nigeria (Balogun) Informal shops in Zimbabwe (Mbare Msika)
Source: BPI Capital Africa. Source: BPI Capital Africa.
Thirdly, significant inflation on key inputs such as maize and wheat can adversely impact
performance as they exert pressure on margins. Other key commodities include cocoa,
palm oil and sugar. In our view, the pass through of higher commodity costs to prices
takes time, which could have a negative impact on margins.

8
Fourthly, Tiger Brands faces various political and socio-economic risks in its rest of Africa
operations. Corruption is also high in some states and ease of doing business ratings in
countries such as Zimbabwe, Ethiopia and Nigeria also remains poor.
Fifthly, the business is exposed to fluctuations of various currencies. For example,
Langeberg and Ashton Foods, is one of the largest producers of canned fruits globally
exports approximately 85% of its products around the world, making the company
highly expose to currency risks.
Finally, given its dominance on the local food market, the business is exposed to regulatory
risks, which in most cases are a result of competition concerns. We recall that in mid-
November 2007, Tiger Brands was fined cUSD12.8m by the Competition Commission
for "colluding" with other bread producers to raise the price of bread. According to the
commission, the four companies involved (Premier Foods, Tiger Brands, Foodcorp
and Pioneer Foods) controlled more than 90% the wheat flour market at the time.
Tiger Brands Equity Story
Positives Negatives
Dominant market position Competitive threats from Multinationals
Regional diversification (SSA) Commodity Price Volatility
Defensive business model focus on food Exposure to political risks (Africa)
Potential for value accretive acquisitions Potential risk of overpaying
Attractive valuation Regulatory risks
Source: BPI Capital Africa.
In a nutshell, we believe that Tiger Brands will remain a key player in the domestic market
(South Africa), while the key investment attraction is its increasing exposure in high
growth markets in the rest of Africa. We believe that the group's aggressive strategy in
Africa will pay off. We estimate Tiger Brands to register FY13-17F
revenue CAGR of
10.7% on the back of robust growth from exports and international businesses. In our
view, rest of Africa businesses should continue to contribute positively to performance.
We also see some scope for earnings surprises on the back of a turnaround at DFM
and margin recovery within the Groceries division. We estimate FY13-17F
EBIT and
EPS CAGR of 17.9% and 18.4%, respectively. Tiger Brands offers a unique avenue to
capture food demand growth in SA as well as other SSA economies given its strong
orientation in defensive food businesses. Key risks include execution constraints in
the rest of Africa and intensifying competition in the domestic market.
The stock has been underperforming its EM peers and most of its domestic comparables,
on the back of lacklustre financial performance in the domestic market and DFM losses.
Tiger Brands is currently trading at FY15F
PER of 13.2x and FY15F
EV/EBITDA of 9.0x,
which represents a 15% average discount to its EM peers - we see the current multiplies
as attractive given its growth opportunities. Consequently, we initiate coverage on Tiger
Brands with a BUY rating and YE14 PT of R360 (17% upside potential).

9
VALUATION
We have valued Tiger Brands using a Sum-of-the-parts (SOTP) method. We detail our
methodology as follows;
- The Milling & Baking, Other Grains, Groceries, Snacks & Treats, Beverages, VAMPs,
Out of Home, Personal Care, Baby Care, Home Care, Exports, International Operations
(East & Central Africa) and Deciduous Fruit divisions were valued using divisional
DCFs. Our WACC assumptions for the various divisions vary slightly depending on
the risk profiles of the business model. We have applied a beta of 0.8 for pure food
businesses and 0.9 for non-food businesses such as HPCB divisions. The following
are DCF assumptions for some of the divisions;
DCF Assumptions
Milling & Baking Other Grains Groceries HPCB Exports Int. Operations
Risk free rate 8% 8% 8% 8% 13% 13%
Equity risk premium 6% 6% 6% 6% 6% 6%
Beta 0,9 0,9 0,8 0,9 0,9 0,9
Cost of equity 13% 13% 12% 13% 18% 18%
Cost of debt 10% 10% 10% 10% 10% 10%
Tax rate 26% 26% 26% 26% 26% 26%
After tax cost of debt 7% 7% 7% 7% 7% 7%
Debt/(debt + equity) 20% 20% 20% 20% 20% 20%
WACC 12% 12% 11% 12% 16% 16%
Long term growth rate 3% 3% 3% 3% 5% 5%
Other Businesses
- Deli Foods (100%) has been valued at 1.5x EV/sales (FY14F
peer average)
- UAC Foods (49%) has been valued at 10.5x EV/EBITDA (FY14F
peer average).
- Dangote Flour Mills (63%) has been valued at 1.5x EV/sales (FY14F
peer average),
which compares with the 1.3x implied from its current market cap and 1.2x implied
by the acquisition cost in 2012.
- Oceana Group (41.9%) has been valued using our own YE14 Price Target (DCF)
- National Foods (37.4%) has been valued at the current market cap on the ZSE; and
- Empresas Carozzi (24.4%) has been valued on a /PBV of 3.6x (Tiger Brand's PBV).
Overall, we set our YE14 Price Target at R360/share, with most of the value coming from
Milling & Baking, Groceries and Exports. We also note that (i) African operations represent
25% of our target valuation, (ii) the stakes in listed assets account for 16% of our target
equity, and ;(iii) other financial investments (R1.8bn) are composed by listed/ unlisted
equities at FV and pension fund investments.
Contribution to SOTP Valuation

10
Tiger Brands SOTP Valuation
Implied EV/EBITDA
Business Description of Operations Stake Methodology Rm Valuation % as EV 2015F
2016F
2017F
Milling & Baking Bakeries & grain-based
FMCG products (mealie meal & flour) 100% DCF Valuation 16 259 25.5% 9.0 8.3 7.9
Other Grains Involved in grains such as rice &sorghum 100% DCF Valuation 3 846 6.0% 9.7 9.1 8.7
Groceries Focuses on groceries
(offering various brands) 100% DCF Valuation 7 079 11.1% 11.6 9.4 8.1
Snacks & Treats Mainly involved in treats such
as sweets & chocolates 100% DCF Valuation 4 361 6.8% 10.0 9.2 8.6
Beverages Cold beverages business
(fruit juices & energy drinks) 100% DCF Valuation 1 596 2.5% 8.8 7.7 7.7
VAMPS Value added perishables such
as bacon, viennas etc 100% DCF Valuation 1 534 2.4% 8.6 8.1 7.6
Out of Home Food products for restaurants,
catering services etc 100% DCF Valuation 909 1.4% 8.8 8.0 7.8
Personal Care Personal hygiene products 100% DCF Valuation 1 159 1.8% 7.9 7.6 7.7
Baby Care Baby products (e.g Elizabeth Anne's, Purity) 100% DCF Valuation 1 743 2.7% 8.3 8.1 7.8
Home Care Detergents & insecticides for home use 100% DCF Valuation 854 1.3% 8.4 7.9 7.5
Exports Export of branded goods into the rest of Africa 100% DCF Valuation 6 384 10.0% 10.0 8.6 7.6
Int. Operations Operations in Ethiopia, Kenya & Cameroon DCF Valuation 3 202 5.0% 9.7 8.2 7.0
Deciduos Fruit Producer of canned fruits &fruit purées 100% DCF Valuation 620 1.0% 8.0 7.1 6.5
Nigeria
Deli Foods Biscuit manufacturing business Target FY14F
based in Nigeria 100% EV/Sales of 1.5x 840 1.3%
Dangote Flour Milling business in Nigera Target FY14F
Mills (flour, pasta & noodles) 63% EV/Sales of 1.5x 4 705 7.4%
EQUITY ACCOUNTED BUSINESSES
UAC Foods Food & beverages businesses in Nigeria 49.0% Target FY14F
EV/EBITDA of 10.5x 1 235 1.9%
Oceana Group Fishing businesss in South Africa & Namibia 41.9% SOP Valuation 4 761 7.5%
National Foods Milling in Zimbabwe ZSE Market
Holdings (flour, maize, stock feeds & FMCG) 37.4% Capitalisation 591 0.9%
Empresas Carozzi Branded foods business in South
America (Chile) 24.4% NAV (PBV of 3.8x) 2 185 3.4%
Total value of operations 63 863
YE13 Net Debt (4 470)
Minorities (PBV of 3.6x) (3 790)
Investments 1 820
Equity Value 57 423
Number of Shares (m) 164
Fair Value 351
YE14 Price Target (ZAR) 360
Upside/Downside 17%

11
SENSITIVITY ANALYSIS
Given the varying growth rates applied to domestic businesses in South Africa, we
have performed a sensitivity analysis of the risk free rate (rf) to long term growth rate
(g). Overall, we have applied a long term growth rates of 3.0% and a risk free rate of 8%
for the key domestic operations.
Sensitivity Analysis (R/Share)
Risk Free Rate
7.0% 7.5% 8.0% 8.5% 9.0%
2.0% 366 354 343 333 324
2.5% 374 361 350 339 329
Long term growth rate 3.0% 383 369 360 345 335
3.5% 393 378 364 352 341
4.0% 405 388 373 360 348
We have also performed a sensitivity analysis for the various key aspects of our valuation
for Tiger Brands so that investors consider different assumptions. These sensitivity
analyses consider the different views of revenue CAGR in the outlook period and the
average EBIT margin for Tiger Brands' largest division; Milling and Baking (27% of
revenues and 45% of EBIT). We have depicted the analysis in the tables below. As
would have expected, different assumptions for the Milling & Baking division lead to
material differences in the value of Tiger Brands.
Revenue FY13-17F
CAGR
4.1% 6.1% 8.1% 10.1% 12.1%
YE14 Price Target 350 355 360 367 373
Average EBIT Margin (FY13-17F
)
15.4% 17.4% 19.4% 20.4% 21.4%
YE14 Price Target 275 318 360 382 403

12
EquityResearch4TigerBrands4July2014
Sector Valuation Comparisons
Market Cap PER EV/EBITDA EV/EBIT EV/Sales P/BV
S.African Food Producers Country USDm 2014F
2015F
2016F
2014F
2015F
2016F
2014F
2015F
2016F
2014F
2015F
2016F
2014F
2015F
2016F
Tiger Brands SA 5 396 16.3 13.2 11.2 10.7 9.0 8.2 13.1 10.4 9.3 1.6 1.4 1.3 3.7 3.3 2.9
Pioneer Foods SA 2 417 16.3 14.3 14.3 12.4 11.1 11.1 15.3 13.8 13.8 1.4 1.3 1.3 0.1 0.1 0.1
AVI SA 2 014 15.6 14.4 14.4 10.2 9.5 9.5 11.9 11.0 11.0 2.0 1.9 1.9 4.6 4.2 4.2
Oceana SA 952 15.2 14.0 14.0 9.7 8.9 8.9 10.7 9.9 9.9 1.8 1.6 1.6 4.2 3.8 3.8
Clover Industries SA 288 10.5 12.5 12.5 5.8 6.2 6.2 7.5 7.3 6.5 0.4 0.4 0.4 1.2 1.2 1.1
Tongaat SA 492 9.3 8.1 8.1 6.1 5.5 5.5 7.5 6.5 6.5 0.6 0.6 0.6 2.2 1.9 1.9
Rainbow SA 1 409 19.1 12.4 12.4 9.8 7.1 7.1 15.3 9.7 9.7 0.9 0.8 0.8 1.9 1.7 1.7
Tongaat SA 1 559 10.7 8.8 8.8 6.7 6.1 6.1 8.2 7.2 7.2 1.3 1.2 1.2 1.3 1.2 1.2
Illovo SA 1 261 10.9 9.3 9.3 6.0 5.3 5.3 6.7 5.9 5.9 1.2 1.0 1.0 1.7 1.5 1.5
SA Food Producers Average 13.8 11.9 11.7 8.6 7.6 7.6 10.7 9.1 8.9 1.2 1.1 1.1 .3 2.1 2.0
SSA Food Producers
Zambeef Zambia 139 29.9 16.9 16.9 9.6 8.0 8.0 14.9 13.3 13.3 0.8 0.7 0.7 0.7 0.7 0.7
Innscor Africa Zimbabwe 417 11.7 11.5 11.5 5.8 5.3 5.3 7.7 7.1 7.1 0.5 0.5 0.5 1.7 1.5 1.3
Cadbury Nigeria Nigeria 923 27.0 26.0 26.0 19.3 19.4 19.4 21.4 19.5 19.5 3.6 3.3 3.3 8.5 7.3 7.3
Nestle Nigeria Nigeria 5 600 29.5 27.3 27.3 20.6 17.6 17.6 23.6 19.6 19.6 5.2 4.4 4.4 18.4 16.5 16.5
Unilever Nigeria Nigeria 1 255 30.5 27.5 27.5 19.2 17.9 17.9 21.0 18.7 18.7 2.9 2.7 2.7 20.3 19.7 19.7
Fan Milk Ghana 236 32.5 24.4 24.4 19.0 14.0 14.0 25.1 18.7 18.7 4.7 4.1 4.1 8.4 7.0 7.0
UACN Nigeria 768 17.3 15.7 15.7 7.4 6.9 6.9 8.3 7.7 7.7 1.7 1.6 1.6 2.7 2.5 2.5
Flour Mills Nigeria Nigeria 1 143 18.2 14.9 14.9 8.0 7.0 7.0 12.3 10.8 10.8 0.7 0.7 0.7 1.9 1.8 1.8
SSA Food Average 24.6 20.5 20.5 13.6 12.0 12.0 16.8 14.4 14.4 2.5 2.3 2.3 7.8 7.1 7.1
EM Food Companies
JBS Brazil 10 076 8.8 8.3 8.3 5.7 5.3 5.3 8.0 8.1 8.1 0.4 0.4 0.4 0.9 0.8 0.8
Brasil Foods Brazil 20 940 18.0 15.2 15.2 10.3 8.8 8.8 13.9 11.1 11.1 1.4 1.3 1.3 2.6 2.4 2.4
Minerva Brazil 742 8.1 6.3 6.3 5.0 4.5 4.5 5.4 4.7 4.7 0.5 0.5 0.5 1.5 1.4 1.4
M Dias Branco Brazil 5 005 15.2 12.3 12.3 11.8 9.7 9.7 13.1 11.1 11.1 2.1 1.8 1.8 3.1 3.0 3.0
Want Want China China 18 489 20.9 18.2 18.2 13.8 12.1 12.1 15.5 13.8 13.8 3.5 3.1 3.1 7.0 6.3 6.3
Inner Mongolia Yili China 11 019 14.6 12.6 12.6 10.1 8.5 8.5 12.4 10.3 10.3 1.1 1.0 1.0 3.0 2.5 2.5
China Mengniu Dairy China 9 588 22.8 19.1 19.1 13.7 11.8 11.8 20.5 17.3 17.3 1.1 1.0 1.0 2.6 2.3 2.3
China Yurun Food China 854 113.4 21.0 21.0 7.6 7.4 7.4 14.9 10.6 10.6 0.4 0.4 0.4 0.4 0.4 0.4
Nutresa Colombia 6 830 30.9 28.9 28.9 14.6 13.3 13.3 18.9 17.8 17.8 2.0 1.8 1.8 1.6 1.6 1.6
Indo Food Agri Singapore 1 115 11.3 10.1 10.1 6.9 6.2 6.2 9.2 8.0 8.0 1.7 1.6 1.6 0.8 0.8 0.8
Grupo Bimbo Mexico 13 981 23.9 20.2 20.2 9.7 8.9 8.9 13.7 12.4 12.4 1.1 1.1 1.1 3.3 2.8 2.8
EM Food Average 26.2 15.6 15.6 9.9 8.8 8.8 13.2 11.4 11.4 1.4 1.3 1.3 2.5 2.2 2.2
Universe Average 21.5 16.0 15.9 10.7 9.5 9.4 13.6 11.6 11.6 1.7 1.5 1.5 4.2 3.8 3.8
Source: Bloomberg

13
EquityResearch4TigerBrands4July2014
Sector Performance Metrics Comparisons
Market Cap Sales Growth EPS Growth ROE Dividend Yield EBIT FCF
SA Food Producers Country USDm 2014F
2015F
2016F
2014F
2015F
2016F
2014F
2015F
2016F
2014F
2015F
2016F
Margin ROIC Margin Net D/E
Tiger Brands South Africa 5 396 13% 12% 10% 21% 23% 18% 17% 25% 26% 3% 4% 5% 11% 14% 8% 32%
Pioneer Foods South Africa 2 623 7% 8% 8% 17% 14% 14% 19% 19% 19% 2% 3% 3% 6% 9% 0% 23%
AVI South Africa 2 039 9% 7% 7% 9% 8% 8% 30% 30% 30% 5% 5% 5% 17% 27% 7% 19%
Oceana South Africa 970 11% 13% 13% 14% 9% 9% 32% 32% 32% 5% 5% 5% 14% 26% 5% 9%
Clover Industries South Africa 287 8% 2% 2% 26% -16% -16% 15% 13% 13% 4% 2% 2% 5% 13% 0% 6%
Astral South Africa 551 5% 5% 5% 56% 15% 15% 22% 24% 24% 5% 6% 6% 3% 9% 2% 15%
Rainbow South Africa 1 369 14% 13% 13% 226% 53% 53% 8% 13% 13% 2% 2% 2% 2% 0% 7% 43%
Tongaat South Africa 2 105 8% 9% 9% 14% 20% 20% 13% 14% 14% 3% 4% 4% 15% 9% 2% 41%
Illovo South Africa 1 250 7% 11% 11% 18% 17% 17% 16% 18% 18% 4% 5% 5% 14% 14% 2% 28%
SA Food Producers Average 9% 9% 9% 44% 16% 15% 19% 21% 21% 4% 4% 4% 10% 13% 4% 24%
SSA Food Producers
Zambeef Zambia 121 12% 5% 5% 10% 23% 26% 2% 3% 4% 0% 1% 1% 5% 3% -18% 45%
Innscor Africa Zimbabwe 401 4% 5% 5% -13% 6% 11% 19% 17% 17% 2% 3% 3% 8% 18% 0% 15%
Cadbury Nigeria Nigeria 861 8% 9% 9% 12% 4% 4% 31% 26% 26% 2% 2% 2% 16% 20% 2% -74%
Nestle Nigeria Nigeria 5 506 18% 16% 16% 19% 8% 8% 63% 66% 66% 3% 4% 4% 21% 35% 12% 34%
Unilever Nigeria Nigeria 1 233 10% 9% 9% 18% 11% 11% 58% 60% 60% 3% 4% 4% 13% 30% 7% 33%
UACN Nigeria 737 17% 10% 10% 28% 14% 14% 13% 15% 15% 4% 4% 4% 19% 11% 5% 27%
Flour Mills Nigeria Nigeria 1 147 16% 15% 15% 36% 22% 22% 11% 13% 13% 3% 3% 3% 6% 6% -9% 127%
Fan Milk Ghana 227 12% 14% 14% 27% 33% 33% 24% 28% 28% 1% 2% 2% 20% 28% 7% -23%
SSA Food Average 12% 10% 10% 17% 15% 16% 28% 28% 29% 2% 3% 3% 14% 19% 1% 23%
EM Food Producers
JBS Brazil 11 425 8% 9% 9% 20% 7% 7% 10% 10% 10% 2% 2% 2% 4% 5% 0% 103%
Brasil Foods Brazil 22 433 11% 9% 9% 38% 20% 20% 15% 17% 17% 2% 2% 2% 6% 7% 1% 44%
Minerva Brazil 756 13% 4% 4% 18% 27% 27% 23% 23% 23% 2% 2% 2% 9% 7% 4% 42%
M Dias Branco Brazil 5 107 10% 20% 20% 20% 22% 22% 22% 24% 24% 2% 2% 2% 13% 17% 8% 9%
Marfrig Global Foods SA Brazil 1 593 10% 11% 11% 17% 32% 32% 9% 11% 11% 1% 1% 1% 5% 10% -2% 23%
Want Want China China 18 489 15% 13% 13% 16% 15% 15% 36% 37% 37% 3% 4% 4% 21% 20% 14% -41%
Inner Mongolia Yili China 11 019 12% 11% 11% 23% 16% 16% 21% 20% 20% 2% 2% 2% 5% 5% 1% -24%
China Mengniu Dairy China 9 588 13% 12% 12% 24% 19% 19% 12% 13% 13% 1% 1% 1% 4% 7% 1% 17%
China Yurun Food China 854 18% 17% 17% 11% 4% 4% 3% 4% 4% 1% 2% 2% 0% 0% -10% 38%
Nutresa Colombia 6 610 8% 6% 6% 11% 4% 4% 6% 7% 7% 2% 2% 2% 11% 5% 7% 16%
Grupo Bimbo Mexico 14 870 6% 3% 3% 30% 18% 18% 16% 16% 16% 1% 1% 1% 6% 8% 5% 79%
Indo Food Agri Singapore 1 107 7% 7% 7% 14% 12% 12% 7% 8% 8% 1% 1% 1% 12% 4% 7% 22%
EM Food Average 11% 10% 10% 20% 16% 16% 15% 16% 16% 2% 2% 2% 8% 8% 3% 27%
Universe Average 11% 10% 10% 27% 16% 16% 21% 22% 22% 2% 3% 3% 10% 13% 2% 25%
Source: Bloomberg.

14
1 6 4 2
+ (# : ! ;
$
COMPARATIVE GRAPHS
TigerBrandsvsSAFoodProducersPeers TigerBrandsvsSAIndices TigerBrandsvsJSEALSIvsJSEFoodIndex
6 4
TigerBrandsvsMSCIEMvsS&PAfrica TigerBrandsvsSSAFoodProducersPeers TigerBrandsvsEMFoodProducers
60
100
140
180
3*$ )
Tiger Brands AVI
Pioneer Foods Oceana
Rainbow Foods Astral Foods
60
80
100
120
140
74, )
Tiger Brands JALSH Index
TOP40 Index JFPPS Index
INDI25 Index JCCGD Index
60
80
100
120
140
( 6
2?(
40
60
80
100
120
140
3*$ 2
Tiger Brands Nestle Nigeria
Flour Mills Nigeria Unilever Nigeria
UACN Innscor
60
80
100
120
140
3*$ 2
Tiger Brands JBS
Brasil Foods M inerva
Nutresa M Dias Branco
Grupo Bimbo
TigerBrandsvsJSE"AfricaPlays" TigerBrandsFwdPER(FY15F
) SAFoodProducersFwdPER(FY15F
)
60
80
100
120
140
3*$ 2
Tiger Brands Shoprite
Tongaat Illovo
TigerBrandsFwdEV/EBITDA(FY15F
) SAFoodProducersFwdEV/EBITDA(FY15F
) Source: Bloomberg.
Source: Bloomberg.
1 6 4 2
*
8
74
1 6 4 2
*
8
74
1 6 4 2
+ (8>( 6 : ! ;
$

15
Tiger Brands has recorded a flattish share performance over the last 12-months as it has
underperformed the main indices on the JSE (JSE ALSI, Top 40, JSE Food Producers and
Consumer Good Indices). Whereas the TOP 40 Index and JSE ASI have gone up by 31%
and 29%, respectively, Tiger Brands share price has increased 1% over the past 12
months.
Compared to SA Food Producers, one can observe that Tiger Brands has underperformed
stocks such Pioneer Foods and Astral Foods that have on average increased by c38%.
However, Tiger Brands has outperformed Rainbow and Oceana that have moved by
0.3% and -5.5%, respectively in the last 12 months. We have also compared Tiger
Brands to stocks such as Shoprite, Tongaat and Illovo that are, in most cases considered
"African Plays on the JSE". Overall, Tiger Brands has outperformed Shoprite and Illovo
while it underperformed when compared to Tongaat (+33%).
When we consider our analysis on Fwd PER and EV/EBITDA it can be observed that Tiger
Brands has historically been trading at a premium to its closest peers such as AVI and
Pioneer. We however observe that since around August 2013, Tiger Brands FY15F
PER
has been at a discount to AVI and Pioneers FY15F
PER and this has pushed the 12-
month average premium to -0.8% and -2.4%, respectively. We believe that a premium
is justified given that Tiger Brands given its powerful portfolio of brands and its superior
growth prospects in Africa. This, in our view could points to the potential of re-rating.
Looking at comparisons with SSA Food Producers, Tiger Brands has outperformed names
such as Zambeef, Innscor, Unilever Nigeria and Flour Mills of Nigeria but underperformed
when compared to Nestle Nigeria (+11%) and Fan Milk Ghana (+13%). On the other
hand, Tiger Brands has been a clear underperformer when compared to its Emerging
Market peers such as Minerva (28%), JBS (+24%), Brasil Foods (+16%), Grupo
Nutresa (+16%) and M Dias Branco (+16%). As a result, Tiger Brands has
underperformed the MSCI Emerging Market and the S&P Africa Frontier Indices.
Overall, we attribute the underperformance to (i) negative sentiments on the growth
prospects of the South African economy and (ii) the company's lacklustre financial
performance that has largely been a result of the losses at Dangote Flour Mills and
competitive pressures on the domestic market. In conclusion, we note that consensus
is generally neutral on Tiger Brands.
Valuation and Recommendation. Comparing Tiger Brands with other SA Food Producers
indicates that the FY15F PER and EV/EBITDA multiples are at a 11% and 18%
premium to an average 11.7x PER and FY15F EV/EBITDA of 7.6x, respectively. However,
Tiger's multiples are at discount to EM peer averages. Overall, we believe that the
premium on SA Food Producers is justifiable given that the Tiger Brands business
model is more aligned to MNCs as a result of the strong focus on regional expansion.
Key triggers for positive earnings surprises in the medium to long term include: (i) a
turnaround at DFM, (ii) margin recovery within the Groceries division; and (iii) robust
growth in Africa (exports and international businesses). Key risks include political/
execution constraints in the rest of Africa and intensifying competition in the domestic
market. Overall, our SOTP valuation points to a YE14 Price Target of R360/share, 17%
upside on the current price. BUY.
Brokers Recommendations
Source: Bloomberg.

16
COMPANY DESCRIPTION
Tiger Brands is the largest branded FMCG Company in South Africa. The core of the business
is FMCG categories that span food, home and personal care as well as baby products. Tiger
Brands has footprint further in Africa in regions such as Kenya, Ethiopia, Cameroon and
Nigeria. In addition, the company holds a minority share in Empresas Carozzi (24.4%), an
FMCG Company based in Chile, Oceana (41.9%) a JSE -listed fishing company, National
Foods in Zimbabwe (37.4%) and UAC Foods in Nigeria (49%). The main business units
comprise of the Grains, Consumer Brands and Exports & International divisions.
BRIEF HISTORY OF OPERATIONS
Tiger Brands started off as Tiger Oats and its first product was a breakfast oatmeal brand
called Jungle Oats. Tiger Oat's first mill was opened in Western Cape. In 1982, Barlow
bought a considerable share of Tiger Oats. In 1988, SPAR South Africa became a
wholly owned subsidiary of Tiger Oats (SPAR was however unbundled and listed as a
separate company in 2004). During the late 1990,s Tiger Oats went through a period
of rapid expansion, buying out other large companies and competitors such as the
Imperial Cold Storage and Supply Company in 1998 and Adcock Ingram in 1999.
After these buyouts, Tiger Oats was renamed Tiger Brands. In July 2008, Adcock
Ingram was unbundled from Tiger Brands. In 2009, Tiger Brands acquired Crosse &
Blackwell's mayonnaise business. The group has also been expanding its operations
in the rest of Africa through acquisitions in the rest of Africa.
Organisational Structure
FY13 Revenue Contribution by
Business Segment
Source: BPI Capital Africa/Company

17
AFRICAN EXPOSURE
SSA (ex-SA) not only provides an avenue for geographical diversification but also attractive
growth prospects for food businesses. The pie charts below illustrate the exposure to
Africa (Nigeria and Exports & International Operations);
FY13 Divisional Revenue Contribution FY17F
Source: BPI Capital Africa/ Company. Source: BPI Capital Africa.
FY13 Divisional EBIT Contribution FY17F
Divisional EBIT Contribution
Source: BPI Capital Africa/ Company. Source: BPI Capital Africa
Tiger Brands has been executing a selective regional diversification strategy through
direct acquisitions and exports. That said, the case for investing in SSA (ex-SA) is clear
as it is supported by strong macro and demographic fundamentals.
Firstly, GDP growth rates in SSA (ex-SA) remain attractive despite short term risk factors.
GDP in SSA (ex-SA) is estimated to expand 5.8% in 2014 and 5.9% in 2015 (IMF).
Improved income levels are expected to set the tone for an increase in the demand for
consumer goods in Africa.

18
2014 GDP Growth Rates in SSA GDP per capita (USD/pp) in African States
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Secondly, the population picture in Africa shows bottom heavy demographic profiles with rapid population growth rates (average
of 2-3%). With a young and growing population, Africa presents a growing consumer base that will drive the sustained
demand for FMCG products.
SSA Countries Population Growth (FY13-17F
) Mean Age of Pop by 2017 in SSA
Source: Euromonitor Source: Euromonitor
Thirdly, the African population has been experiencing significant improvements in urbanisation levels. According to McKinsey &
Company, almost two thirds of the population in Africa will be concentrated in cities by 2050. In our view, the close proximity
of people to urban areas, the easier it becomes for companies to reach consumers with products and services. An improvement
in transport infrastructure also enables the effective distribution of products to various geographical markets.
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19
Urbanisation Rates in Africa
Source: Euromonitor
Urban population leves in Africa (%)
<
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*1< A :0; 5 ) 1*1 : ; #
Source: Euromonitor.
Overall, these factors act to support consumer demand, particularly in consumer staple
categories where Tiger Brands is mostly active. Tiger Brands has been executing its Africa
expansion through (i) international operations (ii) exports; and (iii) strategic stakes/JVs in
companies with exposure in SSA ex SA.

20
INTERNATIONAL OPERATIONS
Tiger Brand's international operations include (i) Nigeria and; (ii) East and Central Africa
operations.
1. Nigeria (10% of FY13 revenues)
Within Sub Saharan Africa, and more broadly within the African frontier market space,
Nigeria has become the proverbial "800 pound gorilla in the room". With a population
size of 170m and a population growth rate of 2.7%, one in every six Africans is a
Nigerian. More recently, the country has overtaken South Africa as Africa's largest
economy after a rebasing calculation almost doubled its GDP to USD510bn. Tiger
Brands has pursued a direct acquisition strategy in Nigeria having acquired a 63.35%
stake in Dangote Flour Mills, 100% of Deli Foods and 49% of UAC Foods. While
revenue contribution is 10%, the contribution to EBIT is currently negative (-10%) on
the back of underperformance of Dangote Flour Mills.
Nigeria Revenue & EBIT Margin Progression
Source: BPI Capital Africa/ Company.
Nigeria GDP Growth Forecasts
'
*$ :#0; ( 2 #
<
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Source: WEO

21
Tiger Brands Operations in Nigeria
Source: Company Reports.
As part of our investment thesis, we review the key Nigerian businesses that are fully
consolidated: Deli Foods and Dangote Flour Mills. We also discuss the turnaround strategy
at Dangote Flour Mills.
Deli Foods (100% held by Tiger Brands)
Deli Foods is a biscuit manufacturing business based in Lagos. The business was
incorporated in 1998 and acquired by Tiger Brands in April 2011. It produces a
variety of biscuits including cream sandwich, sweet and semi-sweet biscuits. Key
brands include Deli and Igloo. According to management, Deli Foods is the #4 player
in the biscuit market and has a market share of 9%.

22
Deli Foods Revenue and EBIT Margin Forecasts Contribution to Nigeria
Revenues in FY13
Source: BPI Capital Africa/Company
' "
*$ :#0; ( 2 #
Source: BPI Capital/Company.
The biscuit industry is projected to grow in double digits rates. According Euromonitor,
the biscuits market in Nigeria grew by c18% in 2012 driven by chocolate-coated
biscuits. The NGN90-NGN100bn biscuits market is dominated by local players - a
consequence of an import ban on foreign biscuits from 2003 to 2012. Tale Foods
leads the market with a 30% value share. Other players include Niger Biscuit Company,
Beloxxi and United Biscuits. In FY13, Deli Foods delivered strong volume growth but
this was not reflected on the bottom line as the EBIT margin was negatively impacted
by insecurity in Northern Nigeria and aggressive competitor pricing in value segments.
Margin recovery. In order to drive margin expansion, Tiger Brands has initiated
engineering efforts in the form of periodic maintenance interventions. We are projecting
a recovery in EBIT margins from 1.0% in FY13 to 2.9% in FY17F
. Also, revenue should
register a FY13-17 CAGR of 12% on the back of (i) capacity additions, (ii) an enhanced
product portfolio and; (iii) increased product penetration in geographies within Nigeria.
In our view, the key downside risk is low pricing power given stiff competition in the
industry.
Dangote Flour Mills (63.35% held by Tiger Brands)
Dangote Flour Mills Plc (DFM) commenced operations in 1999 as a part of the Dangote
group, which was founded by Aliko Dangote listed on the NSE in 2008. The company's
three main divisions are Flour, Pasta and Noodles. According to management, DFM is
the second largest player in the milling industry based on contribution to the total
installed daily capacity. More recently, DFM disposed of one of its subsidiaries; Dangote
Agrosacks Limited which was involved in the manufacture of packaging materials.
Tiger Brands acquired a 63.35% shareholding in DFM in October 2012 for a total
purchase price of R1.5bn.

23
DFM Revenue and EBIT Margin Forecasts DFM Divisional Contribution to
FY14F
Revenue
Source: BPI Capital Africa/Company.Source: BPI Capital Africa/Company.
DFM has however been facing significant constraints and has been registering EBIT losses.
The following are some of the key constraints;
- Excess capacity in the flour milling industry. Management estimates that there has
been an oversupply of flour market in Nigeria with current supply levels estimated
at c2.5x demand. Key players such as Flour Mills of Nigeria and Honeywell have
been increasing capacity. Capacity utilisation levels at Dangote are very low at 30%
vs average of 40%-50% for te industry. The net effect has been a squeeze on
margins, particularly in the flour business;
- Inflationary pressures. An inflationary environment (8% yoy in May 2014), has had
a negative impact on cost management in an environment characterised by
oversupply conditions. The Nigerian consumer is highly price sensitive and this
makes it difficult to pass on price increases;
- Stiff competition. DFM competes with both local and multinational groups in Nigeria
such as Flour Mills of Nigeria, Honeywell Mills and Nestlé. Further, the threat of
new entrants in the food business remains high;
' "
*$ :#0; ( 2 #
Competing Brands (Honeywell in Shoprite store) Competing Brands (Golden Penny)
- Flour Mills of Nigeria-Informal Market in Lagos

24
- Security issues in Northern Nigeria. More recently, Nigeria has been burdened by
ethno-linguistic tensions and terrorist attacks which have negatively impacted the
volume of trade particularly in the northern parts of the country;
- Loose credit control. Prior to the Tiger Brands acquisition, the credit extension
policy was weak and this led to an increase in debtors. Traditionally the sales mix
has 75% credit and 25% in cash sales. As a result, management introduced
stricter measures by pulling back on credit thus negatively impacting on volumes.
The group has largely maintained a more cautious approach to the credit environment;
- Quality issues. DFM has been losing some market share to competitors as a result of
quality concerns particularly on pasta. The group has since taken some steps to
rectify the quality standards for pasta; and
- Debt overhang. As of 1H14, DFM had total interest bearing debt of R1.7bn (gearing of
51%). The debt is has also been attracting significant finance costs (average cost
at 15%-16% pa). As a result, Tiger Brands is looking to re-finance the debt.
Paying hefty school fees for the missteps in Nigeria
In the light of the above-mentioned constraints, 1H14 results indicate that DFM continued
to be a drag on total group earnings. DFM posted an operating loss of R389m, which
was also exacerbated by bad debts provisions and once-off job cuts on the back of
restructuring efforts. In 1H14, Tiger Brands impaired DFM's goodwill and intangibles
in full and took a R849m (USD82m) write down on the business. The write down
represents c45% of the USD182m that the company paid for the asset.
"We have learnt some important lessons. We are lucky in having a very strong partner
in Mr (Aliko) Dangote. He's been supportive - and hopefully we will get it right. In
future, Tiger Brands would "make sure that whatever we look to acquire meets our
standards" and that "we don't end up paying for stuff we have to then impair", we quote
the CEO; Mr Matlare, during an investor presentation. Clearly, Tiger Brands
underestimated the complexities managing a business of Dangote's size in Nigeria
and may also have acquired obsolete/old assets in the process (low capacity utilization
levels of c30% in flour milling).
DFM Historical Financial Performance
" E '
*$ :3&3; ( 2 #
*Note: Prior to 2013 the DFM business model included Dangote Agrosacks Limited

25
6 *, * 2
* 2 3
5 $ 3
% ) . 3
5 % *- 3
3 , 3
6 *, * 2
* 2 3
5 % *- 3
% ) . 3
5 $ 3
3 , 3
Turnaround Strategies being implemented
Despite the write down on the DFM investment, management remains committed to growing
its business in Nigeria. In fact, management has embarked on a "fix, optimize and grow"
strategy and is targeting a return to profitability around FY16F
. Tiger Brands has
appointed a new CEO (ex Unilever Nigeria executive) for DFM, effective July 1st
, 2014.
The new management team is implementing a number of turnaround strategies that
entail;
- Restructuring and the mothballing some mills in Nigeria;
- Optimising supply chain processes and investing in the sales force so as to enhance
distribution and penetration of DFM products (advertisement and promotional efforts
have been stepped up);
- Product innovations through new product formats so as to differentiate its offerings
in terms of packaging; and
- Debt Expulsion. DFM has recently concluded the disposal of Agrosacks to Dangote
Industries Limited for R470m. The funds from the disposal will go towards reducing
the debt burden.
Overall, Tiger Brands has a strategic goal to drive value addition initiatives so as to
increase revenue stream. The group's strategy is to leverage off its grains business and
develop new product lines such as instant porridges (wheat based FMCG products).
High-margin products are expected to drive earnings growth in the outlook period.
Currently, DFM mainly deals with basket products while its key competitors such as
Flour Mills of Nigeria and Honeywell Flour Mills are diversifying into higher margin
products. DFM has been underperforming relative to its Nigerian peers with a FY13
EBIT margin of -17% vs a market average of 15%. Consequently, ROE has been
negative at -16% in FY13.
EBIT Margin Comparisons between ROE Comparisons between DFM
DFM and Nigerian Consumer Companies and Nigerian Consumer Companies
Source: Bloomberg. Source: Bloomberg.
An analysis of 1H14 results reveals early signs of a turnaround. While 1H14 revenue was
down 2.8% yoy to NGN18.6bn (R1.2bn), quarterly sales for 2Q14 were up 8% yoy.
Sales volumes in 2Q14 were driven by a 33% increase in volumes within the flour
milling business which benefited from price reductions effected in December 2013.

26
1H14 and 2Q14 Financial Performance
F F F F
# $ :3&30; & 2 # ( 0 #
Margins also indicating some improvements. Gross profit increased 79% yoy to NGN
296m (R19.2m) in 2Q14 as the GP margin expanded by 115bps to 2.9%. Opex
declined 64% yoy in 2Q14, reflecting effects of a staff rationalisation exercise
undertaken in FY13. This was part of Tiger Brands' initiative aimed at cost reduction. As
a result, DFM registered a recurring EBIT margin of -3.3% in 2Q14 vs. -16.3% in 2Q13.
Based on the various management strategies being implemented, we view DFM as a
recovery play. Further, we are optimistic on the long terms prospects Nigeria. We estimate
FY13-17F
revenue CAGR of 16%. DFM's key strengths are (i) established brands on the
local market, (ii) a wide distribution network and; (iii) a strong local partner (Dangote
Group). An upside in volumes to come through in the long-term from the integration of
SA Grains Business and DFM. We are forecasting a recovery in EBIT margins from -
20% in FY13 to 5.1% in FY17F
. In our view, the major downside risk in the outlook
period relates to intensifying competitive threats from existing players and new entrants.
2. East & Central Africa (5% of FY13 Revenues)
In East Africa, Tiger Brands operates East African Tiger Brands Industries in Ethiopia
and Haco Tiger Brands in Kenya. In Cameroon, the group has a 74.7% stake in
Chocolaterie Confiserie Camerounaise.
East & Central Africa Revenue & EBIT Margin Progression
'
*$ :#0; ( 2 #
Contribution of Regional Businesses
to EAC Africa Revenues
Source: BPI Capital Africa/Company. Source: BPI Capital Africa/Company

27
Ethiopia: East African Tiger Brands Industries (EATBI) (51% held by Tiger
Brands)
Ethiopia has a population of approximately 95.0m and is experiencing high GDP growth
rates (c7.0%) and therefore presents an attractive investment proposition for consumer
companies. Tiger Brands signed an agreement with East African Group plc to create a
new food, household, personal care and cosmetics joint venture in 2011. The principal
activities of EATBI include the manufacture and marketing of various HPC products,
biscuits, flour and pasta. Some of the key brands include Peacock, Crown, Solar,
Micky, Miracle and Florida.
EATBI Revenue & EBIT Margin Progression Ethiopia GDP Growth Forecasts
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Source: BPI Capital Africa/Company. Source: WEO
EATBI has historically been posting double-digit growth (18% in FY13) on EBIT margins of
c12%. The business has largely been benefiting from the upgrade of manufacturing
facilities since 2011. In the outlook period, we expect the business to register a revenue
and EBIT FY13-17F
CAGR of 18.1% and 25.2%, respectively. The business is set to
benefit from the increased penetration of EATBI products in the local market and a
recovery in its HPC business. Still, EATBI should continue to face some risks in the
form of: (i) forex shortages (ii) logistical constraints and; (iii) civil unrest in its export
markets such as South Sudan.
Kenya: Haco Tiger Brands (51% held by Tiger Brands)
Kenya is considered the economic hub of East Africa and continues to show strong
economic growth with GDP growth estimated at 5.7% in 2014 and 6.3% in 2015 (IMF).
Tiger Brands acquired a 51% stake in Haco Tiger Brands in 2008. Haco Industries
was established in the early 1970's and was mainly focused on stationery and shaver
products. Haco then diversified its operation into HPC in the mid 1990's. After the
Joint Venture partnership with Tiger Brands in 2008, Haco is now one of the leading
players in the foods category. Key divisions are BIC & Plastics, Foods, Hair Care, Home
Care and Skin Care and the brands include Ace, BIC, Jeyes, Miadi, Motions, TCB, Blo
and SoSoft. The business also Haco Tiger Brands is now one of the region's leading
FMCG manufacturers, supplying a wide range of products to the entire East African
and COMESA markets.

28
"
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Haco Tiger Brands Revenue & Kenya GDP Growth Forecasts
EBIT Margin Progression
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Source: BPI Capital Africa/Company. Source: WEO.
Historic financial performance has been strong. HACO Tiger Brands has registered a
FY09-13 revenue and EBIT CAGR of 14.5% and 25.9%, respectively. EBIT margins
have been trending upwards from 10.1% in FY09 to 14.8% in FY13. We are bullish
on the growth prospects of the business and forecast a revenue and EBIT FY13-17F
CAGR of 24.0% and 25.2%, respectively. We expect volume growth to be driven by
strong export sales to Ethiopia, Burundi and Rwanda. While the HPC business has
been growing much slower, the focus has been on new innovations and aggressive
marketing efforts.
Cameroon: Chocolaterie Confiserie Camerounaise (74.7% held by Tiger Brands)
Chocolateries du Cameroun (Chococam) is a confectionary business which has
traditionally been focused on chocolate products but is now diversifying into food
categories. The business was acquired in 2008 and its key brands include Arina, Big
Gum, Kola, Mambo, Matinal, Tartina, Tutoux and Chococroc. The business also exports
to Chad and Gabon.
Chococam Revenue & EBIT Cameroon GDP Growth Forecasts
Margin Progression
Source: BPI Capital Africa/Company. Source: WEO

29
Chococam has registered a FY09-13 revenue and EBIT CAGR of 7.4% and 25.5%,
respectively and EBIT margins have expanded from 7.8% in FY09 to 14.4% in FY13.
We believe margins have been helped by better pricing in export markets and capacity
upgrades. Export volumes, particularly to Chad, have remained strong while the focus
on the local market has been to increase market penetration.
In the outlook period, we expect Chococam to post revenue and EBIT FY13-17F
CAGR of
13.2% and 20.0%, respectively. The business is currently diversifying product offerings
in Cameroon to include beauty product lines (such as Miadi) as well as rice and pasta
distribution under the Tastic brand.
ANALYSIS OF GROUP STRATEGY IN EAST AND CENTRAL AFRICA
Haco Tiger Brands is considered the strategic manufacturing hub for the East Africa
Community. EAC economies are growing at an average rate of 5% and the pace is
expected to be sustained as Kenya, Uganda and Tanzania prepare to start production
of oil and gas. The strategy is therefore to increase export volumes out of Kenya into
markets such as South Sudan and Eastern DRC.
Gradual shift of portfolios into pure food product offerings. While HACO Tiger Brands has
been focused on stationery and HPC products, there is a drive to diversify the product
portfolio to include food. There has also been a progressive diversification of
Chococam's product offerings to include consumer staples. Management has cited
that there is massive potential to produce pasta in East and Central Africa.
Growth through acquisitions. In January 2014, Tiger Brands announced that it had
signed an acquisition agreement in Rafiki Mills, in a prospective transaction valued at
USD25m. Rafiki is a flour milling company that owns Magic Oven Bakeries and is the
fourth-largest miller in Kenya. While this agreement was later on terminated, it
demonstrated, in our view, the group's continued drive of increasing exposure in the
region through acquisitions. The business continues to look for new acquisition
opportunities in the region.
ZAR/USD Exchange Rate ZAR Vs African Currencies
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30
All in all, we expect international operation ex Nigeria to be a key growth vector for Tiger
Brands. We forecast revenues and EBIT to grow at a FY13-17F
CAGR of 20.2% and 26.4%,
respectively. We estimate margins to trend upwards from 13.4% in FY13 to 16.4% in
FY17F
. More recently, given the depreciation of the ZAR, Tiger Brands has benefited from
international operations through foreign exchange gains. However, we cite that there are
also downside risks given the volatility of currencies such as the KES, CFA and ETB.
3. Exports
Tiger Brand's export operations include (i) Exports (including Davita) and; (ii) the Deciduous
Fruit business.
Exports incl. Davita (6% of FY13 revenues)
Tiger Brands operates a dedicated division that exports the group's branded products into
the rest of Africa. The export sales capability was enhanced in 2011 when the Group
acquired Davita Trading, an export distribution company, based in South Africa which
has a presence in 31 African countries, including Angola, Botswana, Malawi,
Mozambique, Swaziland, Namibia and Zambia. This has enabled Tiger Brands to
develop a strong platform to drive the growth in exports given that it has extended the
group's presence on the continent. Davita sells its products under three brands, namely
Davita (premium powdered beverages), Jolly Jus (mass market powdered beverage
offerings) and Benny (powdered seasonings).
Tiger Brands Export Markets in Africa

31
There has been sustained growth in export sales to most Southern African countries,
particularly in key categories such as Rice, Pasta, Snacks & Treats and Personal Care.
FY13 revenues were up 20% yoy to R1.5bn as there were strong performances in
Benny and Davita while markets such as Mozambique exhibited robust growth. There
was however a slight EBIT margin compression from 24.8% in FY12 to 24.1% in FY13
due to domestic cost-push in most of the markets.
Exports Revenue & EBIT Margin Progression GDP Growth forecasts in export regions
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Source: BPI Capital Africa/Company. Source: WEO.
In the outlook period, we estimate a revenue FY13-17F
CAGR of 16.4% as we expect an
increase in demand in most of the markets. Davita is currently expanding capacity for
Benny and making new innovations such the launch of Benny Curry Powder. There
has been a strong emphasis to increase the penetration of Tiger Brands through effective
distribution networks across Africa. All in all, we expect the EBIT margin to increase
from 24.1% in FY13 to 29.6% in FY17F
on better pricing in the African markets. Key
risks to our forecasts include (i) civil unrest in some of the export regions, (ii) logistics/
border constraints and; (iii) competition from low-cost competitors in the various
markets.
Deciduous Fruit (5% of FY13 revenues)
Tiger Brands wholly owns Langeberg & Ashton Foods (L&AF), a company based in Western
Cape (South Africa). The Group increased its shareholding in L&AF from 67% to
100% in 2011. L&AF is one of the largest producers of canned fruits and fruit purées
globally and exports approximately 85% of its output, mostly to developed markets.
Some of the key brands include Gold Reef and Silver leaf.

32
Deciduous Fruit Revenue & Deciduous Fruit: Analysis of
EBIT Margin Progression Revenue Growth
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The Deciduous Fruit Division has registered an average top-line growth of 17% in the past
two years while EBIT margins have been around 3.0%. Given that the business is export-
oriented, it has been benefiting from a weak ZAR. Demand has also been boosted by
poor crops (deciduous fruit) in key producing countries. In the outlook period, we
expect revenues to grow at FY13-17F
CAGR of 14% and forecast EBIT margins to
increase from 3.2% in FY13 to 3.6% in FY17F
.
4. Strategic Stakes/JVs in Companies with exposure in SSA
As part of its Africa strategy, Tiger Brand's has accelerated its expansion on the continent
through the acquisition of strategic stakes in various businesses. These companies
either offer direct or indirect exposure to high growth markets in Sub Saharan Africa.
This has had a positive impact on the growth of equity accounted earnings, which have
registered a FY09-13 CAGR of 26.1%.
Evolution of Income from Associates Breakdown of Income from
Associates in FY14F
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33
Companies offering direct exposure to SSA markets
UAC Foods (49% held by Tiger Brands)
UAC Foods is a JV business with UAC of Nigeria (UACN) wherein Tiger Brands holds a 49%
stake. UACN is a Nigerian conglomerate with a significant exposure to food, beverages
and real estate development. Tiger Brands acquired the business in May 2011. UAC
Foods is involved in the manufacture of food and beverage products and its key product
categories are Snacks (Gala Sausage Roll, Funtime Cake, Funtime Coconut Chips,
Gala Crunchies, Snaps Cheeseballs), dairies (Supreme Ice Cream, Supreme Flavoured
Milk) and beverages (Delite Fruit Juice, Swan Water and Swan Soft Drinks). The
business has two manufacturing facilities in Lagos and one in Plateau State.
UAC Foods Revenue & PBT UAC Foods Contribution to Margin
Progression Associate Income (Rm)
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The strategic partnership has been instrumental in strengthening the business model.
While UACN provides local expertise, Tiger Brands is involved in upgrading
manufacturing assets and R&D. UAC Foods has posted revenue FY09-13 CAGR of
12% and average EBIT margins of c17%. In FY13, the business registered a 3%
increase in revenues and a 21% increase in EBIT (EBIT margin increased from 12%
in FY12 to 14% in FY13).
Competitive threats in the food sector remain elevated. The business serves the lower
end of the market where most prices are sticky (e.g. gala). Margins also remain under
pressure on the back of competition from small food players and large food producers
such as Nestle Nigeria. In dairies and soft drinks categories, the major advantage for
key competitors such as the Coke and Pepsi bottlers or Nestle Nigeria is the well
established distribution network which serves a wider market. In terms of the bottled
water business, key competitors include Coke and Nestle Nigeria.

34
Sausage Rolls Market Share Ice Cream Market Share
Source: Euromonitor. Source: Euromonitor.
Informal sale of Gala at Bus Terminus Gala (Sausage Roll brand)
in Lagos (Nigeria)
UAC Foods dominates in the sausage roll market
with its strong brands such as gala. It is expected
that increased MGR (Mass Grocery Retail) in Nigeria
will offer new opportunities for foods segment.
In the outlook period, we expect revenue growth to be driven by new product developments
such as the launch of Gala Tinkies and capacity increases in the snacks business. EBIT
margins should improve on (i) higher margin products such as the mini gala (priced
at NGN50), (ii) the optimisation of internal synergies in the area of procurement and
distribution and; (iii) the extraction of efficiencies in the factories. Overall, we are
forecasting a revenue FY13-17F
CAGR of 16% and expect the EBIT margins to increase
from 14% in FY13 to 20% in FY17F.
Consequently, we expect equity accounted earnings
from UAC Foods to register a FY13-17F
CAGR of 33%.
National Foods Holdings (37.4% held by Tiger Brands)
National Foods is a diversified conglomerate involved in the manufacturing of food products
in Zimbabwe with a distribution network of about 30 depots. The main business lines
are flour, maize meal, stock feeds and FMCG. Innscor Africa has a 37.5% stake in
National Foods. The two are the key strategic shareholders in the business.

35
In the same way as UAC Foods in Nigeria, National Foods has benefited from its strategic
investors. National Foods has a technical partnership agreement with Tiger Brands,
which has been in place for the past 4 years. It includes technical support on issues
such as the rehabilitation of PPE and marketing strategies. Further, approximately
10% of goods sold by the FMCG division are imported from Tiger Brands. On the other
hand, Innscor Africa has been providing market access and financial support to National
Foods.
National Foods Revenue & EBIT National Foods Contribution to
Margin Progression Associate Income (Rm)
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( 6 2 #
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Since the adoption of the multicurrency regime in Zimbabwe, National Foods has been
registering solid growth, posting a revenue and EBITDA FY09-13F
CAGR of 40% and
22%, respectively. In 1H14, the business registered a 9.8% growth in revenue to
USD166m as total volumes increased 7% yoy to 257kt. However, EBIT margins came
under pressure, declining from 7.0% in 1H13 to 6.0% in 1H14. While the group has
been making efforts to defend its margins through improved raw material procurement
strategies, we cite some key risks in the form of;
- Competition from local players. Local competitors include the likes of Probrands
(FMCG) and Blue Ribbon Industries.
- Competition from SA imports. The weakening ZAR has driven the influx of cheap
South African products into the market. This has put pressure on National Foods to
counteract by adjusting its prices; and
- Raw material supply constraints. National Foods imports c80% of its maize
requirements from the SADC region and 90% of wheat from countries such as
Russia, Australia and Ukraine. The group's pricing strategy is largely market related
implying that prices are adjusted whenever commodity prices increase.
Overall, we believe the key risk in the outlook period is the slowing consumer demand in
Zimbabwe on the back weak macro fundamentals in the country. We estimate National
Foods revenues and EBITDA to grow at a FY13-17F
CAGR of 4.3% and 6.8%,
respectively. While the business will face some margin pressure, we expect margin

36
" '
recovery to be driven by improved capacity utilisation levels. We expect the EBITDA
margin to decline from 6.9% in FY13 to 5.5% in FY14F
and then recover to 8.2% in
FY17F
. Consequently, we expect equity accounted earnings from National Foods to register
a FY13-17F
CAGR of 21%.
COMPANIES OFFERING INDIRECT EXPOSURE TO SSA
Oceana (41.9% held by Tiger Brands)
Oceana is the largest fishing company in South Africa and is currently listed on the JSE.
While South Africa & Namibia constitute c69% of revenues and the rest of Africa
contributes c20% to revenues, we believe there is scope for Oceana to grow it revenues
in Africa. The Oceana investment therefore offers Tiger Brands exposure to some high
growth markets in Sub Saharan Africa indirectly. The demand for fish in Africa is likely
to be sustained by strong macro-economic fundamentals in SSA (GDP growth of c5.5%)
and relatively low per capita fish consumption of 7kgs vs. a world average of 18kgs.
Oceana Contribution to Associate Income (Rm) Oceana: FY13 Geographical
Revenue Breakdown
Africa strategy in place. Oceana's plan to tap into the various SSA markets includes
increasing the penetration of pilchards (Lucky Star) in Africa and driving export sales
of frozen horse mackerel. In West Africa, Oceana runs Oceana International a JV with
Falcon Foods, which specialises in the procurement and sale of frozen horse mackerel
in Angola and Cameroon.
All in all, we are bullish on the long term prospects of Oceana and expect the group to
show some healthy numbers in the outlook period. The domestic market is likely to
continue facing some headwinds in the form of slow demand but we believe growth
will be driven by: (i) increased export revenues on the back of a favourable exchange
rate and (ii) improved industrial fish landings. We are forecasting a revenue and EBIT
FY13-17F
CAGR of 8% and 13%, respectively. Consequently, equity accounted earnings
from Oceana should to register a FY13-17F
CAGR of 12%.
In conclusion, Africa offers a significant growth opportunity for Tiger Brands in the long
term. While there is inherent execution risk in Africa, we note that Tiger brands has not

37
been going it alone in its African expansion but engaging local partners in its businesses
in the various countries. For example, in East Africa the local groups are Haco Industries
and the East African Group of Companies. Other key strategic partnerships include (i)
the partnership with UACN in Nigeria, (ii) Dangote Group in DFM and; (iii) Innscor
Africa in the National Foods investment. This approach ensures that Tiger Brands
benefits from local knowledge in the various markets that it operates, thus providing a
platform to develop local brands that are relevant to the respective markets and establish
regional hubs that are also focused on driving export sales to neighbouring countries.
Overall, we estimate that Africa will contribute 31% to revenues and 26% to EBIT by
FY17F
.
FY17F
Divisional Revenue Contribution FY17F

38
SOUTH AFRICAN EXPOSURE
Tiger Brands' domestic businesses remain a key pillar of the business constituting c75%
of group revenues. However, we believe the domestic market has reached some level of
maturity. We also note that growth rates in the businesses have been lower than the
exports and international divisions (Historic FY09-13 revenue and EBIT CAGR of
3.5% and 0.4%, respectively).
Domestic Operations Revenue & EBIT Margin Progression Evolution of Divisional EBIT Margins
"
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M illing & Baking Other Grains
Groceries Snacks & Treats
Beverages VAMPS
Out of Home Personal Care
Baby Care Home Care
Exports International Operations
Decidous Fruit Nigeria
SA CPI and PPI (yoy) Forecast GDP Growth in South Africa
Source: Bloomberg. Source: WEO.
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The domestic environment has also been constrained by macro-economic conditions
such as inflationary pressures, high interest rates and low GDP growth (c3.0%) which has
had a negative impact on consumer disposable income. That said, Tiger Brands has a
defensive business model and its key strength is in its brands. The business is also set
to benefit from margin improvements in key divisions. The domestic businesses are
categorised into two main divisions: Grains and Consumer Brands.

39
GRAINS DIVISION (37% OF FY13 REVENUES)
The grains business is involved in the manufacture of grain-based FMCG products
such as rice, mealie meal and flour. Key brands include Ace, Albany, Aunt Caroline,
Golden Cloud, Jungle, King Korn, Morvite and Tastic. The grains business has two
sub-divisions: Milling & Baking and Other Grains.
Tiger Brands' Key Brands in the Grains Business
Competing Brands in the Grains Business (Premier Foods and Pioneer Foods brands)
Milling & Baking (27% of FY13 revenues)
Milling & Baking Revenue & EBIT Margin Progression Milling & Baking: Evolution of Contribution to Group
Revenue & EBIT
"
'
*$ :#0; ( 2 #
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# $ %* , ) , * ( %* , ) , *
Source: BPI Capital Africa/Company. Source: Bloomberg/Company.

40
The Milling & Baking division is the mainstay of the business given its 27% contribution to
revenues. The division has registered revenue and EBIT FY09-13 CAGR of 3.7% and
4.9%, respectively. However, the business is exposed to commodity price volatility
(maize and wheat) implying that procurement and hedging are key strategic elements
in the business. In FY13, EBIT margins declined from 22% to 19.3% on the back of
cost push pressures (CPI of 6%) and competition from players such as Premier Foods
(Blue Ribbon bread, Snowflake flour and Iwisa maize meal).
Defending EBIT margins. Notwithstanding cost push factors, the division has been
defending its market shares. In 1H14, revenue increased 11.5% yoy to R3.8bn but
margins were slightly down from 18.0% in 1H13 to 17.8%. Revenue growth was
helped by strong volume performances in key categories. The slight margin decline
was a result of (i) cost push pressures, (ii) volatility in most soft commodities which was
exacerbated by a depreciating ZAR and; (iii) intense pricing competition.
Global Wheat Prices (USD/MT) Global Maize Prices (USD/MT)
Wheat price reflects significant Maize price volatility and record prices
upward cost pressure. experienced in H1 due to local maize
Source: Bloomberg. shortage. The maize business saw volumes
decrease ahead of the market decline and
margins were squeezed in a very
competitive environment.
Source: Bloomberg
Overall, we expect a strong recovery in the Milling & Baking division in 2H14F
. Management
has indicated that the business has seen a recovery in consumer demand while volume
declines in some categories had been arrested. We are forecasting revenues to grow at
FY13-17F
CAGR of 8.1%. We expect EBIT margins to increase from 19.3% in FY13 to
19.5% in FY17F
. However, the main downside risk to our forecasts is the continued
down trading to regional and dealer owned brands (DOBs) as consumers search for
value products.
" 3*$ ) 2 . " 3*$ ) 2 .

41
'
1 " 1 1 1 1 1 2 . ) 74, 1
MilIing & Baking- Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 6 267 5 849 6 192 6 682 7 243 7 993 8 703 9 345 9 902
yoy -7% 6% 8% 8% 10% 9% 7% 6%
EBIT 1 158 1 364 1 382 1 473 1 400 1 543 1 688 1 822 1 933
yoy 18% 1% 7% -5% 10% 9% 8% 6%
EBIT Margin 18.5% 23.3% 22.3% 22.0% 19.3% 19.3% 19.4% 19.5% 19.5%
OTHER GRAINS (10% OF FY13 REVENUES)
Other Grains Revenue & EBIT Other Grains: Evolution of Contribution
Margin Progression to Group Revenue & EBIT
Source: BPI Capital Africa/Company. Source: Company
The Other Grains business manufactures products such as rice and sorghum. The division
has registered revenue and EBIT FY09-13 CAGR of 2.7% and 3.1%, respectively. The
rice business is largely affected by the price differential of Thai and Indian rice. Rice
farmers in Thailand are supported by the Thai Government, which has an impact of
increasing the competitiveness of Thai rice relative to Indian rice. In 4Q13, the
government lowered its levels of support to rice farmers although much of this benefit
has been eroded by the depreciation of the ZAR.
Thailand White Rice (USD/MT) Sorghum Prices (USD/MT)
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Source: BPI Capital Africa/Company. Source: Bloomberg.

42
In 1H14, revenues increased 2% to R1.5bn while the EBIT margin increased from 9.1%
in 1H13 to 9.7%. The sorghum beverages business registered satisfactory profitability
despite the increase in raw sorghum costs. The rice business benefited as pricing was
adjusted to reflect a more realistic premium to other rice origin offerings. In the outlook
period, we expect revenues to grow at FY13-17F
CAGR of 6%. We are forecasting EBIT
margins to increase from 10.3% in FY13 to 12.2% in FY17F
. The decline in the
premium commanded by Thai rice relative to Indian rice should allow for a modest
expansion in margins going forward.
Other Grains-Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 2 526 2 236 2 157 2 172 2 809 3 010 3 212 3 407 3 550
yoy -11% -4% 1% 29% 7% 7% 6% 4%
EBIT 256 314 364 259 290 340 385 412 431
yoy 22% 16% -29% 12% 17% 13% 7% 5%
EBIT Margin 10.2% 14.0% 16.9% 11.9% 10.3% 11.3% 12.0% 12.1% 12.2%
All in all, the grains division has registered revenue and EBIT FY09-13 CAGR of 3.4% and
4.6%, respectively. We expect the segment to register a revenue and EBIT FY13-17F
CAGR of 7.6% and 8.8%, respectively.
CONSUMER BRANDS (38% OF FY13 REVENUE)
The consumer brands division is a core segment of the Tiger Brands business model and
is involved in the manufacture of key consumer brands. The sub-divisions include Groceries,
Snacks & Treats, Beverages, Value added Meat Products, Out of home and HPCB.
Groceries (12% of FY13 revenues)
The Groceries division focuses on food products such a tomato sauce, mayonnaise,
peanut butter, canned fruit and baked beans. The key brands are All Gold, Black Cat,
Colmans, Crosse & Blackwell, Fatti's & Moni's and KOO (voted #1 in the Sunday Times
Top Brands Survey 2011).
Tiger Brands' Key Brands in the Groceries Business

43
Competing Brands in the Groceries Business (Pioneer, Nestle, Unilever)
Groceries Revenue & EBIT Groceries: Evolution of
Margin Progression Contribution to Group Revenue & EBIT
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The Groceries Division has registered revenue and EBIT FY09-13 CAGR of 5.1% and -
11.1%, respectively. In FY13, revenues were down 14% yoy to R3.2bn and the EBIT
margin declined from 14.3% in FY12 to a 5-year low of 9.1%. The decline was a result
of intense pricing competition, high input costs and volume pressures.
Strategy focused on recovering volume and market share. In 1H14, revenues recovered
significantly, increasing 18% yoy to R2.0bn. However, the EBIT margin almost halved
from 13% in 1H13 to 7.4%. According to management, this was a deliberate strategy
to recover volume and market share. While other competitors increased prices in
1H14, Tiger Brands withheld price increases in order to recover market share.
Consequently, the business registered volume growth of 17% and value growth of 18%.
The growth momentum should continue in the outlook period and we are forecasting
FY13-17F
revenue CAGR of 15.7%. Further, management have stated that the business
will increase prices in 2H14F
in order to recover margins. We expect a gradual recovery
of EBIT margins from 9.1% in FY13 to 13.1% in FY17F
.

44
Groceries-Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 2 652 3 167 3 423 3 772 3 239 4 014 4 705 5 297 5 810
yoy 19% 8% 10% -14% 24% 17% 13% 10%
EBIT 472 446 524 539 295 321 494 636 761
yoy -5% 17% 3% -45% 9% 54% 29% 20%
EBIT Margin 17.8% 14.1% 15.3% 14.3% 9.1% 8.0% 10.5% 12.0% 13.1%
Source: BPI Capital Africa
SNACKS & TREATS (7% OF FY13 REVENUES)
The Snack and Treats business is mainly involved in treats such as sweets and
chocolates. Key brands include Anytime, Beacon, Black Cat, Inside Story, Jelly Tots,
Maynards, Smoothies, Wilsons and Wonderbar.
Tiger Brands' Key Brands in the Snacks & Treats Business
Competing Brands in the Snacks & Treats Business (AVI, Mondelez, Nestle)

45
Snacks & Treats Revenue & EBIT Snacks & Treats: Evolution of
Margin Progression Contribution to Group Revenue & EBIT
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The Snacks & Treats Division has registered revenue and EBIT FY09-13 CAGR of 2.4%
and 1.9%, respectively. EBIT margins have historically been on a positive trajectory,
rising from 11.3% in FY11 to 15.9% in FY13. In 1H14, the division registered a solid
performance as revenues increased 7% yoy to R1.0bn and the EBIT margin increased
from 16.6% in 1H13 to 17.1%. The business benefited from: (i) an excellent Easter
performance, (ii) favourable sales mix and (iii) strong operational leverage resulting
from cost efficiencies. In the outlook period, we expect Snacks & Treats revenues to grow
at FY13-17F
CAGR of 7.9%. EBIT margins should increase from 15.9% in FY13 to
17.8% in FY17F
as the division benefits from the continued focus on cost reduction
and product innovations.
Snacks & Treats- Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 1 747 1 726 1 734 1 762 1 924 2 086 2 257 2 436 2 609
yoy -1% 0% 2% 9% 8% 8% 8% 7%
EBIT 282 235 195 267 305 355 397 431 464
yoy -17% -17% 37% 14% 16% 12% 9% 8%
EBIT Margin 16.2% 13.6% 11.3% 15.1% 15.9% 17.0% 17.6% 17.7% 17.8%

46
BEVERAGES (4% OF FY13 REVENUE)
The Beverages division business is mainly involved in the manufacture and sale of
cold beverages such as fruit juice drinks and energy drinks. Key brands include
Energade, Hall's, Oros and Rose's.
Tiger Brands' Key Brands in the Beverages Business
Competing Brands in the Beverages Business (AVI, Pioneer (Ceres), Clover and Nestle)
Beverages Revenue & EBIT Beverages: Evolution of Contribution to
Margin Progression Group Revenue & EBIT
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The Beverages Division has registered revenue and EBIT FY09-13 CAGR of -0.9% and
4.4%, respectively. We note that while the business has been experiencing some volume
growth (driven by the Oros, Rose's and Super Juice brands), profitability has been negatively
affected by short-term supply issues on the back of changes in the manufacturing
architecture. In 1H14, revenues were down 2% to R618m and the EBIT margin declined
slightly from 13.9% in 1H13 to 13.6% as service levels were negatively impacted by
consolidation of factories.

47
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Reconfiguration complete. The division is set to benefit from the reconfiguration of
manufacturing processes. Revenue growth will be driven by new product developments
such as the launch of CSDs. We therefore expect revenues to grow at FY13-17F
CAGR
of 11%. We are forecasting the EBIT margin to reach a peak of 13.8% in FY16F
and
then trend downwards thereafter to c12.5% in FY17F
and beyond.
Beverages - Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 1 056 1 084 1 029 990 1 020 1 128 1 252 1 384 1 526
yoy 3% -5% -4% 3% 11% 11% 11% 10%
EBIT 90 112 94 101 106 141 166 191 191
yoy 25% -16% 8% 5% 33% 18% 15% 0%
EBIT Margin 8.5% 10.4% 9.2% 10.2% 10.4% 12.5% 13.3% 13.8% 12.5%
VALUE ADDED MEAT PRODUCTS (VAMPS) (6% OF FY13 REVENUE)
The VAMPS business is mainly involved in the manufacture and sale of value added
protein products/ perishables such as bacon, viennas, smoked sausages, polony, biltong
and various cold meats. Key Brands include Bokkie, Enterprise, Like-it-Lean and Renown.
Tiger Brands' Key Brands in the VAMPs Business
Competing Brands in the VAMPS Business (Rainbow)
VAMPS Revenue & EBIT VAMPS: Evolution of Contribution to Margin
Progression Group Revenue & EBIT
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48
The VAMPS Division has registered revenue and EBIT FY09-13 CAGR of 5.3% and 1.4%,
respectively. In 1H14, revenues were up 4.6% to R943m while the EBIT margin
declined from 7.1% in 1H13 to 6.6%. Margins were negatively impacted by maize
prices (feed) and a weak exchange rate. In the outlook period, the business is set to
benefit from an enhanced distribution network. We are forecasting FY13-17F
revenue
CAGR of 6.3% and an increase in EBIT margins from 6.9% in FY13 to 7.7% in FY17F
.
VAMPS- Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 1 413 1 385 1 419 1 450 1 736 1 850 1 968 2 089 2 214
yoy -2% 2% 2% 20% 7% 6% 6% 6%
EBIT 113 147 121 93 120 128 148 159 170
yoy 30% -18% -23% 29% 7% 16% 8% 7%
EBIT Margin 8.0% 10.6% 8.5% 6.4% 6.9% 6.9% 7.5% 7.6% 7.7%
OUT OF HOME (2.0% OF FY13 REVENUE)
The Out of Home or catering service division is a relatively small business, constituting
2% of revenues. The unit is involved in the marketing of a wide range of Tiger Brands'
products to restaurants, catering services and other out-of-home institutions.
Out of Home Revenue & EBIT Out of Home: Evolution of Contribution to
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The Out of Home Division has registered revenue and EBIT FY09-13 CAGR of 12% and
21%, respectively. Financial performance was particularly pleasing in FY13 as turnover
increased 15% yoy to R403m and EBIT increased 18% yoy. The performance was
driven by strong Christmas and Easter festive season buy-ins by distributors and the
signing of new franchise and contract catering customers. We are forecasting revenues
to grow at FY13-17F
CAGR of 2.6% while the EBIT margin increases from 20% in FY13
to 26.3% in FY17F
on positive leverage from more favourable sales mix.

49
Out of Home- Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 261 269 295 351 403 416 429 438 446
yoy 3% 10% 19% 15% 3% 3% 2% 2%
EBIT 38 63 69 68 80 84 103 114 117
yoy 69% 9% -1% 18% 5% 23% 11% 3%
EBIT Margin 14.4% 23.6% 23.4% 19.5% 20.0% 20.2% 24.0% 26.0% 26.3%
HOME, PERSONAL CARE & BABY (7% OF FY13 REVENUE)
The Home, Personal Care and Baby (HPCB) division is mainly involved in various
health, personal care, baby and hygiene products. Some of the key brands include
Gill, Ingram's Camphor Cream, Dolly Varden, Kair, Lemon Lite, Perfect Touch, Protein
Feed, Elizabeth Anne's, Purity, Airoma, Bio-Classic, Doom, Fast Kill, ICU, Jeyes, Peaceful
Sleep, Rattex. The key sub divisions include are Homer Care, Baby Care and Personal
Care.
Tiger Brands' Key Brands in the HPCB Business
Competing Brands in the HPCB Business (Unilever)

50
HPCB Revenue & EBIT HPCB: Evolution of Contribution to
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The HPCB Division has registered revenue and EBIT FY09-13 CAGR of -0.1% and -2.4%,
respectively. The HPCB business has been operating in a highly competitive market
which is dominated by multinational groups such as Unilever. In 1H14, revenues
increased 3.8% yoy to R1.0bn and EBIT margins declined from 25% in 1H13 to
21.7%, reflecting the intense competition in the key categories, particularly in Home
Care and Baby Care.
Overall, we expect HPCB revenues to grow at FY13-17F
CAGR of 3.5% while EBIT margins
will remain under pressure (EBIT FY13-17F
CAGR of -1.5%) on the back of competition.
New product innovations should, however sustain positive volume growth. More
recently, the division re-launched large value packs for Purity and Elizabeth Anne's in
the Baby category. Other re-launches included DOOM and Airoma in the home category.
HPCB-Operational Performance (ZARm)
2009 2010 2011 2012 2013 2014F
2015F
2016F
2017F
Revenues 1 884 1 787 1 804 1 865 1 877 1 938 2 011 2 083 2 152
yoy -5% 1% 3% 1% 3% 4% 4% 3%
EBIT 485 459 454 454 439 413 446 465 475
yoy -5% -1% 0% -3% -6% 8% 4% 2%
EBIT Margin 25.8% 25.7% 25.2% 24.3% 23.4% 21.3% 22.2% 22.3% 22.1%
All in all, the consumer brands segment has registered revenue and EBIT FY09-13 CAGR
of 3.1% and -2.3%, respectively. We are forecasting a revenue and EBIT FY13-17F
CAGR
of 9.7% and 12.8%, respectively.
In conclusion, we believe growth within the domestic business will largely be driven by
margin improvements and market share gains. We expect the Grains business to remain
defensive while the turnaround within the Groceries segment should help the domestic
revenues to register a FY13-17F
CAGR of 8.6%.

51
OTHER EQUITY ACCOUNTED BUSINESSES
EMPRESAS CAROZZI (24.4%-OWNED)
Empresas Carozzí (founded in 1898) is a leading branded foods business in South America,
which is based in Chile, and has a manufacturing site in Peru. The company offers
various foods, including pasta, rice, cookies, chocolates, candies, biscuits, sweets,
flour, breakfast cereals, desserts, meals, drinks and refreshments, tomato sauces, juices,
and fruit pulp and tomato paste, as well as dog and cat food. Since Tiger Brands
acquired a shareholding in Carozzi in 1999, Carozzi has performed well and Tiger
Brands has received dividends in excess to its original investment in the company.
Empresas Carozzi Contribution to Breakdown of Income from Associates
Associate Income (Rm) in FY14F
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While there is limited visibility in the company, equity accounted earnings from Empresas
Carozzi has registered a FY09-13 CAGR of 14%. We are forecasting a FY13-17F
of 21%
on the back of significant investments that have been made since 2012 in the upgrading
of production facilities and capacity expansions (chocolates and biscuits). In September
2013, Tiger Brands subscribed for additional share capital of USD 24m in the company.
The subscription was in proportion to its 24.4% shareholding in the company. The
capital injection was used to strengthen Carozzi's B/S following a number of capital
projects to upgrade the company's manufacturing facilities and to increase capacity.

52
CONSOLIDATED FINANCIAL REVIEW & OUTLOOK
1. INCOME STATEMENT
Evolution of Divisional Revenues (Rm)
Overall, we estimate Tiger Brands to register FY13-17F
revenue CAGR of 10.7%. We
expect revenue growth to be driven by exports and international businesses. In fact,
exports and international businesses should continue to contribute positively to the
Group's performance and therefore we estimate a 31% revenue contribution and
26% EBIT contribution by FY17F
. Overall, subdued demand in the domestic market
(South Africa) will be offset by fast-growing African markets. However, Tiger Brands'
strategy on the domestic market that has seen the Group limiting price increases in
order to gain market share should bear fruit in FY14F
and beyond. For example, the
Groceries division has been restraining some price increases and therefore is set to
turnaround given that there is scope to increase prices in the outlook period.
FY17F
" '
M illing & Baking Other Grains Groceries
Snacks & Treats Beverages VAMPS
Out of Home Personal Care BabyCare
Home Care Exports International Operations
BPI vs Consensus
FY14F
FY15F
FY16F
Rm Cons. BPI Diff. Cons. BPI Diff. Cons. BPI Diff.
Sales 29 392 30 383 3% 31 998 33 893 6% 34 913 37 323 7%
EBITDA 4 207 4 421 5% 4 906 5 384 10% 5 505 6 105 11%
EBITDA Margin 14.3% 14.6% 15.3% 15.9% 15.8% 16.4%
EBIT 3 586 3 625 1% 4 227 4 649 10% 4 710 5 362 14%
EBIT Margin 12% 12% 13% 14% 13% 14%
Net Income 2 822 3 112 10% 3 263 3 821 17% 3 743 4 510 20%
EPS Adjusted+ 17.3 19.0 10% 20.1 23.3 16% 23.0 27.5 20%
Source: BPI Capital Africa/ Bloomberg
Compared to consensus, our revenue growth estimates are on average 7% ahead of
consensus between FY14F
and FY17F
. In our view, the market could be understating the
growth prospects in the rest of Africa.

53
Evolution of Sales (Rm) Consensus Evolution of Adj. EPS (ZAc) Consensus
) 3*$
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Tiger Brands has stated its objective of attaining and maintaining an EBIT margin of 15%.
We are forecasting a recovery in the EBIT Margin from 11.4% in FY13 to 14.7% in FY17F
.
Currently, the group is facing pressure on divisional EBIT margins on the back aggressive
market competition especially in the Groceries and HPCB categories. However,
management has been focusing on driving cost efficiencies through value chain process
improvements. A key positive will be the turnaround of DFM. The business has been
weighing down on group performance given that it has been registering losses at EBIT
level. Overall, we are forecasting a FY13-17F
EBIT CAGR of 17.9%.
Evolution of Divisional EBIT (Rm)
" '
M illing & Baking Other Grains Groceries
Snacks & Treats Beverages VAMPS
Out of Home Personal Care Baby Care
Home Care Exports International Operations
FY17F
Competitive pressures limiting margin expansion. According to management, the
landscape has largely become competitive on the back of dealer-owned brands with
retailers such as Shoprite and Pick n Pay becoming more powerful from competition
point of view. The retail and wholesale markets continue to consolidate and the major
retailers are seeking to grow overall market shares by entering into new channels and
store formats. A key strategy on the domestic market has been to invest behind brands and
achieve cost competitiveness from a procurement perspective. Tiger Brands currently
invests c2.5% of sales in marketing and there is a plan to increase that to 4.0% by FY18F
.
Source: BPI Capital Africa

54
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Evolution of Tiger Brands' Marketing Expenses Progression of Opex
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We expect net financing costs to decline by 3% in FY14F
to R369m. Finance charges will
remain relatively high on the back of the group's borrowing levels which include the
underlying debt in DFM of R1.5bn. Nonetheless, the proceeds from the sale of Agrosacks
will assist in reducing the overall debt in DFM, which currently bears interest at
approximately 15% pa. The refinancing of the remaining debt in DFM at more favourable
interest rates is being explored. We estimate net finance costs to decline by 36% in
FY15F
. The lower finance charges can be attributed to improved cash generation
driving debt repayments and benefits of the associated finance income. We forecast
interest cover to increase from 8.0x in FY13 to 20x in FY15F
and 58x by FY17F
.
Income from associates is estimated to register a FY13-17F
CAGR of 18% driven by
strong earnings growth from Oceana and other international operations. There is also
scope for foreign currency translation gains relating to international associates.
Interest Costs Vs Interest Cover Growth of Income from Associates
(FY13-17F
CAGR)
Overall, we estimate adj. EPS FY13-17F
CAGR of 18.4%. We expect stronger growth in
FY15F
and FY16F
as the group benefits from margin upliftment from key divisions. We
have estimated a dividend pay-out ratio of 52% in the outlook period.

55
2. BALANCE SHEET & CASH FLOWS
The net debt position has increased from R1.2bn to R4.5bn in FY13 mainly as a result
of DFM's underlying debt of R1.5bn as well as additional group borrowings of R1.5bn.
We are however expecting a strong improvement in normal operating cash flows in the
outlook period and estimate a reduction in the net debt position to R3.1bn in FY14F
,
R2.0bn in FY15 and R625m in FY16F
. The net debt to EBITDA ratio of 1.2x is set to
decline to 0.1x in FY16F
. The current gearing levels are however within the general
borrowing covenant limit of 2.5x.
Net Debt Evolution Owners Equity Vs ROE
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Source: BPI Capital Africa/Company. Source: BPI Capital Africa/Company
We expect capex for FY14F
to be R850m and expect capex to ease in the outlook period
as the group finalises key projects in the various businesses. We note that the cash
generative business model creates room for acquisitions in various SSA markets and
attractive dividend streams for holders. All in all, we expect Tiger Brands to deliver
attractive returns to shareholders as we project FY17F
ROIC and ROE of 18.7% and
25.2%, respectively.
Analysis of Capex Analysis of Return Measures
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56
Tiger Brands Performance Metrics
Ratios 2011 2012 2013 2014F
2015F
2016F
2017F
12m to September
ROA 16% 15% 10% 10% 15% 17% 17%
ROE 26% 24% 20% 17% 25% 26% 25%
ROCE 21% 21% 14% 16% 18% 19% 19%
Net debt to equity 0.16 0.10 0.32 0.22 0.13 0.04 -0.05
Net debt/EBITDA (x) 0.46 0.30 1.19 0.71 0.39 0.11 -0.15
Net debt (Rm) 1 671 1 182 4 470 3 143 2 085 688 -986
Effective tax rate 28% 27% 26% 26% 26% 26% 26%
Free cash flow 1 814 1 904 1 906 1 548 2 958 3 538 4 041
FCF margin 8.9% 8.4% 7.1% 5.1% 8.7% 9.5% 10.0%
Asset Turnover (%) 126% 127% 107% 129% 136% 136% 135%
Per share (ZAR) 2011 2012 2013 2014F
2015F
2016F
2017F
12m to September
EPS 16 17 16 19 23 28 31
DPS 7.9 8.5 8.7 9.9 12.1 14.3 16.1
NAVPS 61.0 69.5 78.6 82.6 93.8 107.0 121.9
FCFPS 11.2 11.7 11.6 9.4 18.1 21.6 24.7
Source: Company, BPI Capital Africa.
Segmental Revenues & EBIT
CAGR
12m to June (ZARm) 2012 2013 2014F
2015F
2016F
2017F
13-17F
Grains revenues 8 854 10 053 11 002 11 915 12 752 13 452 8%
yoy growth 14% 9% 8% 7% 5%
EBIT 1 732 1 690 1 883 2 074 2 234 2 364 9%
yoy growth -2% 11% 10% 8% 6%
EBIT Margin 19.6% 16.8% 17.1% 17.4% 17.5% 17.6%
Consumer Brands Revenue 10 190 10 199 11 431 12 622 13 727 14 758 10%
yoy growth 0% 12% 10% 9% 8%
EBIT 1 522 1 346 1 442 1 754 1 995 2 179 13%
yoy growth -12% 7% 22% 14% 9%
EBIT Margin 15% 13% 13% 14% 15% 15%
Exports & Int. Revenue 3 244 3 944 4 813 5 697 6 587 7 485 17%
yoy growth 22% 22% 18% 16% 14%
EBIT 459 575 710 988 1 167 1 331 23%
yoy growth 25% 23% 39% 18% 14%
EBIT Margin 14.1% 14.6% 14.7% 17.3% 17.7% 17.8%
Nigeria Revenue 390 2 809 3 136 3 660 4 259 4 921 15%
yoy growth 620% 12% 17% 16% 16%
EBIT (384) (265) (24) 109 228 338
yoy growth -31% -91% -555% 110% 48%
EBIT Margin -98.5% -9.4% -0.8% 3.0% 5.4% 6.9%

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