What is SHV worth?, page-7

This is just my opinion, but I can't see how a share price anywhere near $4.00 would represent in any way a fair value of the assets owned by the company. Indeed, even the current price, just under $5.40, seems too low by my assessment.

The $5.40 price tag reflects a market cap of just over $500 million. Yet if Select were to decide to liquidate all of their assets in an orderly manner over the next 12 months, I am sure that the funds raised would easily exceed $500 million. And taken together, all of these assets would probably be worth even more, as being bundled together collectively enhances their strategic value.

I don't know if anyone noticed this, but yesterday one Queensland news article included a quote from the MD of this company, Paul Thompson, in a report on farm values:

Irrigator Select Harvests, which grows almonds across 7500 hectares across three farms in the Riverina, would like to acquire more greenfields land or established orchards.

But Select CEO Paul Thompson said the company had been outbid by 20-30 per cent in recent tenders, with pricing sustained by active buying from foreign institutions.

Mr Thompson said six years ago Select acquired established orchards for $15,000 a hectare.

“There haven’t been many transactions to test the market but we are hearing prices that would be closer to $75,000 a hectare,” he said. "We can’t get our head around what people are paying for these assets.”

Now, if the figure quoted there- $75,000 per hectare- is accurate, that would imply that the 3509 hectares of orchards owned by the company would  be worth $263 million, just over half the value of the current market value of this company.

And although the land and trees are the most significant assets listed in the SHV Annual Report, the company owns many other assets, and it does look like the valuations of these are by and large very conservative.

For example, the total value of the intangible assets -Good will, Brand value, Water Rights- definitely looks to be on the low side, at just $60 million (pg 56).

Back in July, Pepsico seemed to think the 'Lucky' brand was strong enough to catch the attention of the Chinese market, having agreed to distribute the products of this brand in China.

Likewise, Sunsol is a very strong brand: the latest presentation mentioned that domestic sales for this line were up 24% last financial year, a particularly impressive result considering that the Sunsol products seem to have been relegated to the bottom-rung 'shoe duster' shelf in pretty much every Coles and Woolworths store I have visited recently.

And the Water Rights?. I'm sure at the moment, most farmers in NSW would have no doubt about the critical importance of this asset, with 2018 looking set to be one of the driest years on record for much of the state.

It seems to me that the sell off over the past few weeks is an over-reaction to the concerns about frost damage in Griffith and Hillston, although the negative market sentiment over the past week is also probably playing a part here as well.