Although I am not impressed with ELD's current management's performance to date (see my previous posts on ELD), I think some of the comments/analysis being posted on the future of ELD is overly pessimistic.
Rural services are coming through a bad period due partly to poor management but partly also to weather-related issues beyond management's control such as floods earlier this year following years of draught, economic factors such as GFC and high A$, affecting woodchip demand, and then incompetent political handling of issues like cattle exports and carbon pricing etc.
Given predicted tightness in food supplies in some parts of world, agriculture is an industry which has a great potential for good returns in the future. ELD happens to be in this industry. As the eurozone and USA economies settle down, and with China and India forecast to continue to grow at a high (albeit at lower than past) growth rates, companies in the agriculture including ELD should do well.
Therefore, the asset writedowns past the current low economic period for companies like ELD are likely to be not as severe as are being predicted in some of the posted analysis.
IMO there is a significant potential for ELD to recover, possibly from the end of this FY. The question is whether or not the current management is up to the task. The real test for this will come from the results of FY12, as the external adverse factors I mentioned above that the company experienced this year and the previous years won't be there. I believe there is a good chance that the company will recover and do well, and there is also a good chance of a takeover as soon as predators see things starting to improve.
ELD Price at posting:
26.5¢ Sentiment: None Disclosure: Held
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