Good news reported at Select Harvest about Almond2019 outlook: 80% of the crop is at in excess of $8.50/Kg and our observations are prices ex-US and Australian ports are at the upper end of previous guidance (A$8.40-8.70/Kg). Crop forecast of 20,750t is ~23% above theoretical levels and we note there appears upgrades to outward years, with theoretical crop forecasts up ~5% in FY20e and ~7% in FY21e. SHV have noted that mature orchards are now consistently yielding closer to 1.3t/acre versus industry benchmarks or 1.2t/acre and this has formed the basis for the stronger theoretical production outlook.Following the result, we have upgraded our NPAT forecasts by 40% in FY19e, 0% in FY20e and 2% in FY21e. Upgrades have been principally driven by stronger yield outcomes. Our target price lifts to $8.35ps (prev. $8.00ps) reflecting higher orchard NPV values.Investment view: We see SHV as having greater operating leverage to elevated almond prices in this cycle than the last, with production at its peak (FY24-26e) forecast to exceed FY15 levels (the previous peak in almond prices when SHV generated EBITDA of $100m) by ~65%. We retain our Buy rating and increase our price target to $8.35.
https://www.livewiremarkets.com/wires/select-harvest-shv-yielding-a-strong-result
Price for Almond at upper end of Guidance.
This is good news.
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