Tiger Ticks Up As Market Gives Update the Nod [column]

Johannesburg, Feb 17, 2009 (Business Day/All Africa Global Media via COMTEX) -- TBLMY | Quote | Chart | News | PowerRating -- TIGER Brands' share price did well, rising 0,58% to R129,50 on the JSE yesterday after a statement that said trading was slowing in line with expectations. Real growth in headline earnings per share is expected in the year to September 2009.

How highly investors rated the trading statement was evident from the fall in a competitor's stock. AVI, a potential Tiger takeover target, shed 2,48% to R19,70, while the stock of Pioneer foods slid 3,15% to R24,01.

These stocks are seen as defensive in times of falling stock market prices.

Tiger said the high level of inflation that affected food production last year would probably start to decline later this year .

Lower inflation and possibly lower interest rates this year would favour consumer spending and stimulate demand.

Lower food inflation, however, would also squeeze margins at food processors.

Some concerns have been raised over the competition aspects of the proposed AVI deal -- particularly in the snack and treats operations.

One also has to also question the wisdom of Tiger buying the footwear and apparel divisions of AVI -- operating profit at the divisions dipped last year.

These are also hardly the food-processing activities at which Tiger excels.

Tiger needs to be cautious -- the longer one tries to keep a target in one's sights, the harder it becomes. It has been nearly four months, and a formal proposal has yet to be tabled .

Tiger also announced director Chris Nissen's resignation.

Nissen is an ANC stalwart in Western Cape, and has been touted as a possible party leader in the province .

He's head of the election team, and was once quoted as saying: "If you want to be in business, don't be in politics, and if you want to be in politics, don't be in business."

It would seem that he is taking his own advice to heart.

THE South African Revenue Service (SARS) is on the interest-free loan offensive. Companies need to make sure loan contracts are properly structured, Madeleine Schubert of Shepstone & Wylie's tax department says.

SARS's view on intra-company loans has shifted, she says.

A recent court case confirmed that the right to use loan capital interest-free has a monetary value, and although the value could not be turned into money, it should be included in the gross income of the taxpayer in the year of assessment in which it was accrued.

If a holding company were to provide an interest-free loan to a subsidiary to invest as capital expenditure, it would not attract tax.

However, if in exchange for the interest-free loan the holding company required either goods or services in return without a charge or fee, then this would be deemed to be taxable.

COPPER is, obviously, the metal of electronics, so it stands to reason that it should fall when Japan's economy slumps -- as it did yesterday.

And with an almost unprecedented slump in Japan, copper has come full circle. It is now close to the lows it reached in the early parts of this decade when miners were taking desperate steps to cut production in order to try and keep the price at a more or less respectable level.

Yet there is a sub stratum to this story, too. In theory, the Chinese stimulus package should help draw a line under the price and keep it above $3000 a ton -- just below where it is now.

In theory, too, there should be support for the price because China's State Reserve Bureau is reportedly buying into weakness.

But it's interesting that people don't really believe in the Chinese stimulus package any more than they do the US package.

Bets are the efforts of the government simply won't be sufficient to hold back the rising tide. Let's hope they are wrong, but we have to face the fact that this is the going bet right now.

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