Costa Group Holdings Ltd

CGC Details
·         Bullish momentum: Costa Group Holdings Ltd (ASX: CGC) stock rallied over 7.1% on April 11, 2017 after the group received an uplift in the market at the back of emerging strong demand of avocado and the positive outlook for blackberries that might lift the earnings for the group. CGC in the 1H 2017 has reported 9% growth in the revenue to $445.6m and the berry category sales growth was the largest contributor to the revenue growth. The NPAT before SGARA, material items and non-controlling interests grew 35.7% to $24.0m on 1H FY16, and the statutory NPAT of $15.0m in 1H FY17 was reported. Moreover, in December 2016, CGC acquired Avocado Ridge orchards and packing operations, a grower of 275 hectares of high quality avocados in the Childers and Kumbia regions of central Queensland. Therefore, the company initiated avocados as the fifth core produce pillar and there is momentum continuing to build with China berry expansion.

·         Recommendation: CGC stock rose over 44.5% in the last six months (as of April 10, 2017) and is trading at a high level. We give a “Hold” recommendation at the current price of $ 4.69
 

1H 17 Financial Performance (Source: Company Reports) 

Aurizon Holdings Ltd

AZJ Details
·         Update on impacts of Cyclone Debbie: Aurizon Holdings Ltd (ASX: AZJ) stock rallied over 3.6% on April 11, 2017 while coal related stocks received mixed sentiments despite high prices. Due to Cyclone Debbie and localized flooding, the company has mobilized all available crews and resources over the recent days to inspect and commence repairs, where possible, on the four coal systems (Newlands, Goonyella, Blackwater and Moura), which are part of the Central Queensland Coal Network. The re-opening time for each system is subject to weather conditions. Moreover, the cost of repairing rail infrastructure and the loss of Network revenue is expected to be recovered as part of the established regulatory process with the Queensland Competition Authority. This could have a negative impact on FY2017 Network earnings. Further for the Rail business, the temporary closure of the coal systems will have a negative impact on FY2017 volumes and earnings. However, it is too early to assess whether there will be a change to AZJ’s FY2017 volume and EBIT guidance.

·         Recommendation: AZJ stock rose over 10.3% in the last six months (as of April 10, 2017) and is trading at high levels; and we believe the stock is “Expensive” at the current price of $ 5.45

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