Hi Keybored, I agree with your statements on NTA growth and how share values are determined. I do however think that the current share price does not reflect the real value of the AAC assets, as it could be undervaluing the land assets by some way. Lets assume I am an asset stripper / VC and the future operating profit potential is of no consequence I just want to profit by selling the assets. Here are a few numbers to consider:
Current Market cap based on $1.45 share price = $874m Assuming an NTA of $1.75 the value of AAC based on its tangible assets = $874m *1.75/1.46 = $1,047m
I'll assume that total value is made up of Land and Livestock, the livestock value is easiest to calculate. I'm no cattle baron but a search on google indicate the current price of cattle is between $800 - $2000 per head, so I'll be conservative and assume an average value of $1000 for the AAC herd.
The current AAC herd is 350,000 in size, so has a value of 350,000 * $1000 = $350m
NTA value of AAC land = $1,047m -$350m = $697m
That's the 2:1 ratio you mentioned, but let's look at that land valuation:
AAC operates 7m ha of land, I think most is fully owned, it's hard to get the exact number but based on the ratio of owned to leased properties 80% seems a reasonable assumption.
Owned land = 7,000,000 * 80% = 5,400,000 ha NTA value of land from above = $697m Average value of land = 697,000,000 / 5,400,000 = $129 per ha
When I do a search on the current average price of farmland in Queensland and the NT, I find the current prices are $5000 ha and $3000 ha respectively.
I appreciate these are averages but the difference between $129 and $3000 is hard to ignore, even if the AAC land was worth on average $1500 ha, still far less than the average price in the NT let alone Queensland. This would make the AAC assets worth:
Land = 5,400,000 * 1500 = $8,100m Livestock = $350m
Total assets = $8,450m Revised NTA per share = $14
Admittedly selling 350,000 head of cattle and 5.4m ha of land is a considerable task and could effect the price of both, so in the real world is unlikely, but that should not effect the valuations, I think that's why the AAC share price has significant reason to grow
AAC Price at posting:
$1.45 Sentiment: Buy Disclosure: Held
(20min delay)