Thursday, March 28, 2024

Gold pushes Zespri share surge

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Analysts have lifted Zespri’s value by 7% as its share price continues to ramp up despit a labour shortage for the latest harvest.
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In the past year the USX-listed shares have moved steadily upwards in value from $4.80 to $8.80 with healthy levels of share trade activity. 

An analysis of Zespri’s share price by Craigs’ Investment Partners analyst Chris Byrne moved the indicative share price range up from $6.20-$9.50 to $6.50-$10.20 a share, with a base valuation of $8.20 a share.

Underpinning the increase in value is the greater-than-expected revenue from the 2018 SunGold licence, backing a strong 2019 earnings prediction, 95% up from the 2017 result. 

The boost in land area offered from 400ha to 700ha has had the main impact along with the lift in licence prices.

The average price of $257,000 a hectare is 12% up on what Craig’s estimate.

Craigs also painted a rosy picture for this financial year, predicting a net profit after tax of $170 million to $175m.

That is expected to also push the dividend level up from this year’s estimated 70c a share to $1.13 to $1.20 a share and puts the kiwifruit marketer’s net yield firmly into double figures at 13.8-14%, up from this year’s 8.4% and well ahead of the 3% yield reported for the 2016 financial year. 

Licence sales revenue continues to form a growing portion of Zespri’s corporate income, at almost $200m for this year compared to about $75m only two years ago.

The analysis also notes the recent change to Zespri’s constitution got strong grower backing and put in place an effective share cap, with the maximum shareholding of four shares for each tray of production for active growers while introducing dividend restrictions on non-grower shareholders.

Byrne sai restricting future share ownership to growers could ultimately quell the share price but that will take some years to play out given the seven-year timeframe non-growers have to exit ownership.

He has put a relatively wide valuation on the Zespri stock price, acknowledging growers are in a better position to pick the subtleties of the market and the industry. 

However, he also cautioned there is always the risk of game-changing events that can highlight the industry’s reliance on a single, highly successful crop. 

They include a recurrence of a Psa type outbreak or even a marmounted stink bug incursion.

“You have to be a bit wary. 

“In five years’ time we could be looking at a very different industry. It could be one that has taken a hit from something like that or it could be one that is even bigger than it is now with a successfully launched red fruit and continuing strong demand for SunGold.

“Hopefully that is what we will be seeing.”

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