About the author:
- Author name:
- By Belinda Moore
- Job title:
- Senior Analyst
- Date posted:
- 03 March 2014, 7:00 AM
- Sectors Covered:
- Agriculture, Food & Beverage, Travel and Chemicals
Select Harvests (SHV) reported a solid 1H14 result which beat our expectations. Almond fundamentals remain bullish and we have upgraded our forecasts. We would not be surprised to see SHV remain in an earnings upgrade cycle for the next couple of years.
SHV's 1H14 result (NPAT of A$18.4m; +118%) was impressive. The strong result was driven by rising almond prices, improving yields and continued performance improvement across the business.
The strength of operating cashflow (+102.6%) was another highlight. Cash balances should rise significantly moving forward as SHV is now past its peak capex requirements and mature orchards generate strong cashflow.
The dividend also surprised on the upside at 11cps compared to 3cps in the previous year.
Management's current crop estimate is 12,600 tonnes and almond price is A$8.30/kg (the current spot price is A$9.00/kg).
It is important to highlight that SHV's initial estimates for the new crop are conservative until the actual outcome is known post-processing. We note that SHV's crop estimates were upgraded a number of times during FY13. On the back of SHV's upgraded outlook commentary, we have upgraded our FY14 NPAT forecast by 18.8% to A$40.5m.
Share price target
We reiterate our Add recommendation on SHV with a new share price target of A$7.75.
If you are interested in finding out more about Select Harvests (SHV), please contact your nearest Morgans office.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
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