While always best to DYOR, Mark Gardner from MPC Markets is in...

While always best to DYOR, Mark Gardner from MPC Markets is in the 'lively' blog this morning:

Stock Pick #2 – GrainCorp (ASX: GNC)

To see the real value of ASX agricultural companies, you must start by Ignoring the lazy investor analysis. Companies such as GrainCorp and Elders have transformed themselves in the last decade and are far less cyclical and weather-dependent.

Despite the worst drought in history for the Murray Darling basin[1] between 2017-2019 and then COVID in 2020, GrainCorp managed to maintain an 8% ROE over the last seven years. During this period, it has developed business lines outside of grain. GrainCorp now has six growth areas spanning:

• biofuels/Agri-energy,
• animal nutrition,
• grower services,
• digital and Ag Tech, and
• alternative proteins.

Personally, I speak to around a half dozen farmers with cropping and grazing businesses, I don’t bother with analysts' calls from offices in the “big smoke“ whose simplistic view of agricultural businesses led to a sharp sell-off when El Nino was declared.

Unfortunately for those who sold, good results came from ELD, NUF and GNC in November, coupled with solid rainfall that has occurred Australia-wide, making for good conditions for GNC (and Australian Agriculture) for 2024.

Even after the recent rally, the stock remains cheap at a 6.6 P/E, a deceiving yield of 3.74% (which is actually 7.2% with fully-franked special dividends, and a price-to-assets ratio of 1.15.