shv vertical integration, page-19

I just got a lucky google cache into some "Intelligent Investor" content, which is actually not that favorable for SHV......but not that informed either, still its a good point

"Select Harvests (SHV) — Gareth Brown

Two years ago, this almond company was highly profitable and had 10 years of clear growth ahead of it. Today, its future looks highly uncertain.

Select Harvests had the contract for managing 30,000 acres of almond groves on behalf of failed MIS company Timbercorp (in hindsight, Select was the only party making any money out of it).

Of those assets, the Timbercorp administrator has sold more than 20,000 acres to Olam International, an impressive-looking Singaporean based agricultural produce business. The remaining 10,000-odd acres are being sold by the Timbercorp Primary Infrastructure Fund, and we wouldn’t be surprised if they end up in the same hands.

The problem for Select is that Olam has plenty of its own skills when it comes to processing, marketing and distributing almonds. It may make an offer to buy the whole Select business. It may negotiate a much cheaper contract with Select. Or it may cut Select out altogether and build its own processing facilities.

What it won’t be doing is handing all of the profits over for Select to keep.

The current share price represents a substantial premium to Select’s book value. And that book value, presumably, isn’t far from what Olam could build its own processing facility for. At any price above $4, we’d recommend you take your money off the table."