Great news with the Ord Minnett (OM) analysis. Definitely that...

Originally posted by Len

Midway Price Target Raised 45% to A$1.78/Share by Ord Minnett

Great news with the Ord Minnett (OM) analysis. Definitely that was the source of the bump today - last time we got to $1.46 we were rebuffed to $1.30, let's see if we can hold.

I still see the same challenges persisting, and no real catalyst just yet. The broker report I reckon is actually conservative in some of the estimates, but overall I think it remains fair. Key points for me:

• OM are forecasting for prices in China to pull back more in 2H22, and even some ships to be pushed into 1H23, due to their energy crisis. This doesnt seem to align well with what management is saying, but could happen. Still, despite the higher prices from Japan and the China negotiations expected in Dec/Jan, they are forecasting FY22 revs to be slightly LOWER than FY23. I find that hard to believe considering the massive jump in volume expected. Regardless of whether some revenue is FY22 or FY23, the increase in China is set for some time due to the additional capacity / mills coming online
• OM has a high valuation of the plantation land / biomass that will be sold. They are estimating ~$24m of asset / biomass sales in FY22 for north of Melbourne (hope it happens that soon, but uncertain) and a further $110-130m in FY22-25 for Otways. I think Midway has been slow on asset sales, so as long as the price of land keeps growing at 12-15% like primary land is at the moment then delays aren't a big deal. Still, I think that OM may be over estimating the realised value of this. Regardless, a special dividend of 74-80c on the back of this would be nice - and barely would impact on FCF going forward.
• Geelong Grain Terminal is expected to cost $25m CAPEX in FY22-23, and OM estimate that it will generate only ~$3m EBITDA (but also save some costs). I personally have not been a fan of this investment. Will take 8yrs to repay from EBITDA, and this is a red flag of capital allocation.
• Bell Bay Port Expansion is a good capital allocation in my opinion, with $12m of CAPEX in FY22-23 generating an additional ~$2.5m EBITDA - so only 5yrs to repay. And they could expand further.
• Small note, OM state that FY22 will be impacted by higher Aussie, but Midway has hedged more than 80% of it, so reckon this will impact FY23.

GLTAH. Still value even at current prices, though risk to my mind remains capital allocation.