Premier Foods (PFD) 98.2p

Gain to date: 136.9%

Original entry point: Buy at 41.45p, 23 April 2020

Cake and gravy maker Premier Foods (PFD) could be in line for a windfall amid a bid from Italy’s Newlat Food for bread maker Hovis, in which it has a 49% stake.

Having written off the value of the asset in 2016, the proceeds from any sale would represent a hefty profit on the balance sheet and potentially enable further reductions in its borrowings.

The company has separately announced plans to redeem £40 million worth of corporate bonds. The decision follows strong trading for the food producer in the first half of its financial year (running to 26 September 2020).

The redemption of £40 million of the £130 million outstanding on bonds due in July 2022 is expected to reduce the cost of financing and save the company £2 million a year in interest costs.

The combination of strong trading and an improving balance sheet position is rewarding our faith in the business in spades – with the shares more than doubling since the spring.

Investors should get more insight into the company’s recent trading with the scheduled publication of its first-half results on 11 November.

SHARES SAYS: The upcoming trading update looks like it could be a positive catalyst. Still a buy.

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