Key Points:
- Rainbow Chicken’s market cap has surged to $494 million after its JSE debut, with shares rising 42% since listing.
- RCL Foods unbundled Rainbow Chicken to focus on core businesses, allowing each entity to grow independently.
- Rainbow Chicken recapitalized with a convertible loan and $16.3 million from shareholders, boosting volumes and cutting costs.
Rainbow Chicken Limited, the poultry firm backed by South African billionaire Johann Rupert, has established itself as one of the top-performing companies on the Johannesburg Stock Exchange (JSE) following its recent listing.
Since its debut on the JSE on Wed., June 26, Rainbow Chicken’s market capitalization has surged near the $500-million mark. According to data from Billionaires.Africa, the share price has increased by 42 percent, rising from its listing price of R2.85 ($0.155) to R3.6 ($0.218) at the time of this report. This surge has boosted the company’s valuation on the JSE to R9.08 billion ($494 million).
This significant milestone follows the unbundling of Rainbow Chicken by RCL Foods Ltd., controlled by Johann Rupert’s investment holding company, Remgro Limited. The separate listing marks the third on the JSE this year, indicating strong investor interest in South African companies despite macroeconomic challenges.
RCL Foods unbundles Rainbow Chicken
RCL Foods’ strategy focuses on core businesses and allows each entity to pursue its growth trajectory independently. The positive market reaction to Rainbow Chicken’s listing reflects investor confidence in the company’s standalone potential.
CEO Marthinus Stander commented on the unbundling and listing, stating, “The intent is to have a purely agri-business that will or should extract better value.”
RCL Foods, 77-percent owned by Remgro, is known for brands such as Selati sugar, Ouma rusks, and Yum Yum peanut butter. The company has been undergoing a strategic review to assess the sustainability and value of its portfolio for shareholders.
The unbundling of Rainbow Chicken was approved by the RCL board on June 3, involving the distribution of all Rainbow shares held by RCL to existing RCL shareholders. The distribution ratio was one Rainbow share for every RCL share held on the record date.
Rainbow Chicken’s recapitalization success
Prior to its listing, Rainbow Chicken recapitalized with a convertible loan and an additional R300 million ($16.3 million) from shareholders. The company has managed to lower its costs, add new chicken breeds, and invest in additional equipment to boost volumes. “There are also additional tailwinds in the industry, with a good rand-dollar exchange and positivity around the government of national unity,” added Stander.
RCL’s latest group financial results for the six-month period ending December 2023 highlighted Rainbow Chicken’s progress in achieving its turnaround strategy. The business has implemented a sustainable operational framework aimed at restoring profitability across economic cycles.
Rainbow Chicken expects its EBITDA performance in the second half to be broadly in line with the first half of the financial year, ending December 2023, typically a stronger trading period due to seasonality during the December festive season.