CGC, page-38

Goldman Sachs have increased the target price to $5.95. Not really aggressive considering the price hit $5.97 today! Anyway some comments below:

What's changed
We toured CGC’s South Australian citrus assets this week. In our view the market may have underestimated the quality and size of these operations. We estimate citrus is a close third in EBITDA contribution in the key produce division, behind mushrooms and berries. CGC is the largest player in the Australian Citrus market with 16% share. 70% of product is exported, mainly to Japan, at a premium price point to the local market. Competitive advantages include: scale, quality of assets and fruit, access to water and the fact that the orchards are located in the only major “fruit fly free” citrus growing region in Australia.
We provide an update on blueberry prices, which are down slightly on pcp so far during this peak volume season (July to Dec.). CGC sell c.50% of its volume outside peak season where prices are significantly higher so we do not see current pricing as a major threat to its blueberry profitability.

Implications
We raise our FY18/19/20 EPS forecasts by 2.9%/1.6%/2.2% following minor adjustments to assumptions for citrus, avocados and the CF&L division.
Valuation
Our 12m TP rises by 6.3% to A$5.95 and is derived using an equally weighted blend of DCF and P/E valuation methodologies. Our P/E valuation increases by 7.3% driven by the increase in earnings and is based on a 27.4x multiple, which includes 40cps of upside for acquisitions. Our DCF increases by 5.3%, driven by our earnings revisions and a slight increase to our longer-term assumptions in the group’s avocado, citrus and China berries operations. We maintain our Buy rating.
Key risks
General ag risk, weather and water, price deflation, global supply and demand.