colonization and takeover, page-30

There's been some discussion here about whether earnings are 25 cents or 36 cents+. Both points of view seem defensible to me given the guidance provided. But after digging and thinking about things I don't think earnings are really going to influence SHV share price - at least for a while. Given how earnings are impacted by agricultural accounting standards earnings are a rubbery number at best and climatic conditions make them virtually impossible to predict with any certainty. Not to mention throwing in almonds being priced as commodities and exchange rates

If SHV had a competitive advantage and a regular earnings stream than pricing them on earnings seems justifiable. I don't think they have either, especially now they don't have the Olam contract.

If SHV can't/shouldn't be valued on forecast earnings then it should be valued on the Balance sheet.

If the almond industry is not viable then SHV asset valuations would be decimated and SHV's worth is land value for alternative uses & plant/equipment at scrap/fire sale values and no value for biological assets etc. Debt might be repaid but probably nothing left over for shareholders. Despite the current high AUS dollar I see nothing to really suggest the almond industry is not viable - far from it.

I have already said that I don't believe SHV has a competitive advantage within the industry. But are they at a disadvantage or on a level playing field. Using the balance sheet I get a valuation of $2.76 (replacement valuation) if they are on a level footing.

If they are at a disadvantage then the assets will probably eventually change hands at a discount to replacement value as is happening with the current transactions (refer discount booked on Lake Powell purchase). My rule of thumb for a disadvantaged asset valuation is the written down valuation for tax purposes. This values SHV at $1.37.

There are lots of guesses and assumptions in my valuations of $2.76 or $1.37 but they are some sort of foundation for decision.

How bad could it get for SHV against these valuations? I am familiar with another similar company, Webster who are involved in Walnut Orchards. I believe them to be in a stronger position because they have less debt, own the orchards that they manage and have plant & equipment matched to the size of the expected crop they control. I have similar balance sheet valuations for them of $1.08 (replacement) & .$0.85 (WDV) their current market price is $0.41. I wouldn't expect SHV to get that unloved but who knows. That level of market disgust would equate to something like SHV at $1.00.

So my conclusion. SHV is somewhere around my balance sheet valuation, given where it is positioned within a viable almond industry. It however does not yet represent the best opportunity to buy discounted agriculture assets.

Given the market sentiment and other oppertunities I'm not rushing in. I think the biggest risk in waiting is Olam's intentions - but why should they hurry when they have the superior hand. Who else may want SHV assets?

These ramblings are my opinions and I base my investment decisions upon them. I am undoubtedly wrong in many ways and I'm happy for my errors to be corrected but I will probably not enter into a debate where I disagree.

Best wishes.