Be honestly, even worst case which is 23.5M net profit, EPS is still 6C. 50C SP just 8X PE.
Best case which is 3M net profit, EPS is 7.5C, 50C SP is 6X PE.
Actually, the fair value for WLD now is 70C basic on 10PE. Next financial year WLD may provide 50,000 to 100,000 cattle to China JV wellao. FY18, with new vessel kieple and fully operation of Wellao, China market can benefit WLD at least 30M profit up.
WLD is still under investment and growing stage, Shearer just has one shipment in this FY but has much more depression expense,interest expense, fuel expense, labour cost and other cost related. I guess, the expense of Shearer should large than benefit of Shearer in this financial. JV wellao is still under progress. Open brazil market still need investment in current FY. However, those investment will benefit future FY.
So, part of reason for downgrade is timing issue and part of reason is cattle price, but cattle price will rebalance in the future just like oil price.
WLD Price at posting:
48.0¢ Sentiment: Buy Disclosure: Held
