Criterion From:The Australian February 27, 201312:00AM
Tandou (TAN) 42.5c; PrimeAg (PAG) $1.20
SMART foreigners are sniffing around our listed farming plays, which tend to trade at steep discounts to their land value.
Three new owners have emerged on the register of the Mildura-based Tandou, which alternates trading water rights with actually growing stuff (mainly cotton) on its lower Murray Darling land. This results from an ongoing sell-down by 28 per cent holder GPG, the once-venerable value picker which is disposing of all its assets.
The Tandou newbies are the Laguna Bay Pastoral Company with 5 per cent, the Collins Street-based PF Agriculture with 8.6 per cent and a mystery party with 5 per cent. The shares changed hands at 36.5c each, ripper value given the shares have a net asset backing of 53c (or 66c on directors' valuation).
"We are very excited to have new people on the books," says Tandou chief Guy Kingwill. "We had been concerned about the overhang of the GPG portfolio."
Laguna, which is backed by US commodities trader (and George Soros's old chum) Jim Rogers, also has an 11 per cent stake in PrimeAg, which is selling off its land because listed investors don't "get it".
PrimeAg this month sold $125m of properties and water entitlements to an arm of the North Carolina-based wealth manager TIAA-CREF. The sale, at a 60 per cent premium of book value, is worth around 46c per PrimeAg share.
On Monday, Tandou reported a 134 per cent profit surge to $1.89m, with a record planting of 7120 hectares of cotton and 4150ha of cereals. Almost all of the earnings derived from water trading, including a $17m rights package believed to have been picked up by TIAA-CREF.
Seasonality means more of Tandou's cropping profits will emerge in the current half.
We'll keep Tandou as a spec buy. PrimeAg is a hold ahead of a shareholder vote in early April to approve the land sale and a subsequent distribution of the spoils.
