Select Harvests Ltd

SHV Details
·         Footprint expansion through acquisition: Select Harvests Ltd (ASX: SHV) stock rose over 6.95% on March 03, 2017 leading to a total increase of about 10% in the last five days alone at the back of improving sentiments. Director, Michael Iwaniw, has recently acquired about 2,599 fully paid shares of SHV. The group earlier reported first half of 2017 results wherein the Net Profit after Tax (NPAT) reached A$11.7 million as compared to 1H16 NPAT of A$23.9 million. SHV has acquired the Jubilee Almond Orchards in South Australia, for a consideration of A$26.5 million. This property comprises 1,147 acres of mature and developing the almond trees (792 acres bearing and 355 acres non-bearing), and 1,335 ML of high security water entitlements and a shareholding in Laragon Pty Ltd (an almond processor). At full maturity these orchards have the potential to produce in excess of 1,400MT of almonds. The group has stated that 2017 harvest is few weeks behind the 2016 harvest.

·         Recommendation: SHV stock fell over 9.95% in the last six months (as of March 02, 2017), and given the concerns over the almond prices we believe the weakness might continue going forward. We give an “Expensive” recommendation at the current price of – $ 6.00

Spotless Group Holdings Ltd

SPO Details
·         Transitional period for the company: Spotless Group Holdings Ltd (ASX: SPO) stock recovered over 2.5% on March 03, 2017 post witnessing some weakness in the last few days. One of the directors, Garry Arthur Hounsell, recently acquired 41,250 ordinary shares. SPO in 1H 2017 has reportedthe fall of 9.2% in the revenue from Facility Services business due to the previously identified contract losses, completion of lower margin construction business and weakness in the Business & Industry and Resource markets. The 1H 2017 results reflected a transitional period for the company as the company continues to execute the 2016 strategy reset. In the first half, SPO was awarded a number of new and renewed contracts, valued at over $71m (new business) and $99m (renewal business) in annual revenues. Further, in October 2016, SPO has purchased Nuvo, a privately-owned electrical and technology services business, for cash of $23 million. Additionally, SPO expects FY17 NPAT (pre-exceptional items) to be between $80m and $90m.Although business development returns are being slower, the group is taking initiatives for setting a stronger platform for growth.

·         Recommendation: SPO stock rose over 23.1% in the last six months (as of March 02, 2017) and we maintain a “Buy” recommendation on the stock at the current price of – $ 0.82
 

1H 17 Financial Performance (Source: Company Reports) 

a2 Milk Company Ltd

A2M Details
·         Shareholding in Synlait: a2 Milk Company Ltd (ASX: A2M) stock also rose over 3.64% on March 03, 2017. The group announced about acquiring, through a subsidiary, approximately 8.2% of the fully paid ordinary shares in Synlait from FrieslandCampina at a price of NZ$3.275 per share for total consideration of about NZ$47.9m. This represents about 3% premium to the NZX one month volume weighted average price of NZ$3.18. Moreover, the transaction would reaffirm A2M’s infant formula supply agreement with Synlait. The supply agreement would strengthen the business relationship between a2MC and Synlait by providing certainty around medium term growth plans. This supply agreement will continue to be the cornerstone of the commercial relationship between the two parties.

·         Recommendation: A2M stock rose over 21.21% in the last six months (as of March 02, 2017) and is trading at a high level. Given the trading conditions, certain concerns of supply of infant formula products in China, and rising competition, we give an “Expensive” recommendation at the current price of – $ 2.28

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