BUY: AVI
The branded consumer goods group’s portfolio is anchored in hot beverages, biscuits and snacks. It is a high-quality, high-return business: return on average capital employed was 36% in financial 2026. Cash generation is also impressive. AVI converts roughly 65% of ebitda into free cash flow and paid out 86% of headline earnings as ordinary dividends in financial 2026, plus a 300c per share special dividend. At 10 times financial 2027 earnings (June year-end), AVI trades well below its 10-year median earnings multiple of 15.1 and the 13.5 long-term average for South African industrials. This is a low valuation for a business of this quality, making it an attractive time to buy.
SELL: Stadio
This is a great business at the wrong price. Stadio is a tertiary education business with 56,000 students offering both in-person and distance learning. The recently opened Durbanville campus adds further capacity and student numbers are growing. Stadio was recently included in the JSE all share index. On inclusion the share price rallied 18% as index trackers bought the share to the required weighting. The business now trades at a forward earnings multiple of 35, compared with its long-term average of 22. Earnings are expected to grow at 20% a year. This means that if the share price stays at this level, it will take three years to return to the long-term average earnings multiple. Stadio remains a good business with many years of growth ahead, but at this time and at this price, there are better investment opportunities.
