a select investment could reap fine harvest

In Fairmax media today:


Matthew Kidman
July 5, 2012

Select Harvest (SHV)

HUNGRY investors are always scouring the market in the hope of finding an unloved company that needs some renovating. Investors should be cautious though because, as many people would have learnt first hand, renovations can take longer and cost more than initially forecast.

One company that can be categorised as a turnaround that needs renovating is almond manager and farmer Select Harvest. Select was a superstar of the market before the fragility of its business model - aligned to a single client - was exposed a few years back. The stock has fallen from a high of just under $15 a share in 2005 to a recent low of $1.10.

A number of major changes have taken place at the company that could act as catalysts for the stock to move higher. Last year former ABB Grain boss Michael Iwaniw joined the board and was quickly installed as chairman. Iwaniw has been busy reshaping the company. He has undertaken a review of the food division, sold $18 million of water rights to strengthen the balance sheet and employed Paul Thompson as the new chief executive officer. Thompson officially starts in the job on July 16.

Select's operations are changing rapidly. The almond management contract with its biggest customer expired last week, which will most likely see earnings decline from 2013 to the 2014 financial year. Adding to the company's woes is a stretched balance sheet. No doubt Thompson has his work cut out.

The stock has bounced from its lows of $1.10 to $1.35 in rapid time. The share price has been weighed down by selling by former chairman Max Fremder. This is now coming to an end.

The stock's valuation is undemanding on a price to earnings multiple of just over 10 times 2013 earnings. If Thompson can articulate a clear strategy once he has taken over, it is possible the stock could climb towards $1.75. Helping his cause would be a weaker Australian dollar and a steady global almond price.


http://www.theage.com.au/business/a-select-investment-could-reap-fine-harvest-20120704-21hib.html