SHV (ASX) The facts you need to know!

Originally posted by Bwaller28 ↑

Hi Guys,

I am a massive believer in the company and have done a fair amount of valuation work on it (P/E circa 7x). I think it’s important to keep the facts in mind and focus on the long term. I was initially looking at the company last year and missed last year’s massive rally. Im grateful price has pulled back and Im seeing this as an opportunity for a great entry point.
Yesterdays company update from management was very pleasing. Profits up, demand up, supply down (over the longer term). Trading volume was pretty decent today and there was clearly a good seller about. In my opinion its either a large shareholder trying to exit in thin markets (perhaps a redemption or forced exit) of fat cat Hedge Funds trying to steal your money.
Its interesting to note that open shorts have been growing according to Short Man (see chart below) which is inversely related to SHV share price.
Stick to the fundamentals and the facts. Below I have included some useful facts and information about the company. Love to hear everyone's thoughts and opinions.

Cheers
View attachment 132923
Select Harvest (SHV) is Australia's second largest almond producer and the largest listed almond company in the world. SHV performs basic processing for the majority of its export volume and the remainder is sent for further processing by the company's Food division. Global almond consumption has grown by approximately 8% per annum over the past decade, with China and US demand growing significantly. I am a strong believer in the future of the agricultural sector as global growth transitions away from manufacturing and towards a more consumer centric environment.

Further, a growing Asian middle class is placing major demand pressure on agricultural resources. I believe this will result in higher prices for producers and consequently greater profitability. I believe the ‘Dining Boom’ Thematic is set to be a multi-year investment theme and Australasia is set to directly benefit from this dynamic given their favourable trading arrangements and close proximity with China and the rest of Asia. Because SHV is the largest almond producer listed globally it provides investors an excellent opportunity to gain exposure to a niche investment set. Further, trading on a forward P/E of 7.6x we believe it is extremely cheap given the outstanding growth opportunities.

Global demand for almonds has doubled over the past decade to almost 1.2 million Tonnes and is estimated to be worth US$ 4.5 billion. The perceived health benefits of almonds is materially boosting demand. While markets in the USA and Europe are growing strongly, most recent expansion has been in India, China and the Middle East. At the current growth rate, global production will be insufficient to meet future demand post 2016. This is likely to result in higher almond prices globally.
The Australian almond industry has undergone rapid expansion, becoming one of Australia’s fastest growing horticulture sectors. It is now the 2^nd largest producer of almonds globally (after the US) and on a percentage basis, Australia is the fastest growing almond industry in the world. Australia currently produces around 7% of world almonds, which is heavily dominated by California (80%).
SHV produced stellar 2015 results. Earning were up 186.5% (EBIT $89.6m from $31.2m) which was driven by solid organic/acquired volume growth and record high almond pricing (AUD11.45 versus AUD8.50/kg). The company has a moderate amount of leverage/gearing with AU$100m in debt or approximately 38% debt to equity. The company is in its expansion phase so it requires ample funds to undertake all its expansion plans. Because almond prices are continuing to rise, we don’t not see the moderate leverage the company holds as an issue.
Almond producers receive USD denominated prices. Hence, SHV profitability is positively related to declines in the AUD. A lower AUD means there is a direct translation gain to SHV. Because they sell almonds in USD, when they convert these revenues back to AUD’s it is relatively higher as the AUD falls.
Combined with strong underlying demand and increasing production capacity through addition almond plantations, SHV benefits from the worst drought conditions on record in California, which produces around 80% of the world's almond crop. The drought conditions in California are leading to further restrictions to supply and consequently higher almond prices. Although weather conditions are volatile, we believe that Australia as the second largest almond producer globally will benefit materially from this weather trend. As global warming continues, California is likely to continue to experience water management and hence, both the quality of the almond and the cost of producing them is likely to deteriorate. Australia does not face these issues and therefore will fill the void.
Weather factors are a major determinate of crop yield, and consequently, almond prices are very sensitive to current weather patterns. This does mean, like all agricultural investments, investing in SHV exposes investors to unpredictable weather related factors. However, SHV currently has a diverse range of geographical locations for its plantations. This means it is less susceptible to weather changes. It is also improving its operational efficiencies which should help to address any water supply related issues.
This is a long term investment which gives investors a unique and excellent opportunity to gain exposure to the growing agriculture industry. Almond prices are predicted to rise over the long term given their health benefits and the shortage in supply compared to current demand forecasts. To capture the full benefit for the rise in agricultural and almond prices, we believe investors should have a long term investment focus.

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Agree with what you're saying...but looks like this is now being shrouded by the global market sentiment which says "sell everything whether they're good or bad."

No.	Vol.	Price($)
1	407	$3.93

No.

Vol.

Price($)

407

$3.93

Price($)	Vol.	No.
$3.98	1465	1

Price($)

Vol.

No.

$3.98

1465

No.	Vol.	Price($)
1	407	3.930
2	10502	3.920
1	1157	3.910
1	1700	3.900
1	1000	3.850

No.

Vol.

Price($)

407

3.930

10502

3.920

1157

3.910

1700

3.900

1000

3.850

Price($)	Vol.	No.
3.980	1465	1
4.000	202	1
4.050	2500	1
4.100	4123	1
4.170	2318	1

Price($)

Vol.

No.

3.980

1465

4.000

202

4.050

2500

4.100

4123

4.170

2318

(20min delay)
Last $3.93		Change 0.010(0.26%)		Mkt cap ! $558.4M

Open	High	Low	Value	Volume
$3.93	$3.97	$3.91	$317.4K	80.88K

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