Costa Group Holdings Limited (ASX: CGC)

Well positioned to execute further profitable organic growth- Costa is Australia’s leading grower, packer and marketer of premium quality fresh fruit and vegetables. It is continuously working hard to keep improving the quality of its produce and the service it delivers to its consumers. It supplies its produce to all the major Australian supermarket chains, as well as independent grocers and a range of food industry stakeholders and exports to Asia, North America and Europe.

Costa’s half-year revenue was up by 9.8 per cent for the period ended December 31, 2017 and amounted to $489.3 million against $445.5 million of the prior corresponding period. Statutory profit was up by $51.2 million as compared to 1HFY17 that was majorly driven by the fair value gain of $40.1 million recognized on the deemed disposal of the existing 49 per cent of interest in African Blue. Meanwhile, Commonwealth Bank of Australia became the substantial holder of the Group since 15 June 2018. The Group recently announced that it has signed a conditional agreement for the acquisition of Coastal Avocados in Northern NSW, which will be the hub for Costa’s 4th avocado growing region. It is expanding its business in China with small volume of blueberries that are harvested from both farms leading into December and the main harvest expected around Mar-May that is in line with its expectations. Moreover, its 1HFY18 Revenue globally increased from 1H FY17 which reflected additional China raspberry sales. The International segment is expected to deliver significant earnings growth for the full year, reflective of increased plantings.

Financial Performance Highlights (Source: Company Reports)

The net leverage for 1HFY18 increased to 1.4x following African Blue acquisition. Its Balance sheet and debt facilities are still well positioned to support its growth initiatives. Its new blackberry plantings are establishing well, and a small harvest of the new variety Elvira is expected from March this year. It is expected that it will complete its plantings in China in FY18 despite significant challenges with wet weather hindering development work. The full-year earnings will be more heavily weighted to the second half due to the timing of the avocado harvests and further growth of the international operations including the increased African Blue shareholding. The company is projecting NPAT (pre-SGARA and material items) growth of approximately 25 per cent for the full year, up from previous guidance of at least 20 per cent. Meanwhile, the stock was up by 86.69 per cent in the past one year and by 19.89 per cent in the last one month as at June 21, 2018. The stock prices slipped by 3.34 per cent as on 22 June 2018 owing to some volatility and profit booking. We maintain our “Hold” recommendation on the stock at the current market price of $ 8.68 as the Group is expanding internationally which will further enhance Costa’s competitive position globally.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.