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Originally posted by g41
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An overlooked small cap agri stock
MARTIN PRETTY "When your competitors go one way, do you follow them, or do you go the other way?" That question was asked of a room of close to 100 financial advisers by keynote speaker Geoff Ramm at Centrepoint Alliance's annual conference last week. The focus at the time was effective marketing but resonated with this investment manager in a different context. The stocks that contributed most to the performance of the Equitable Investors' Dragonfly Fund in the month of September were clear cases of neglect. Investors, on the whole, had turned their focus elsewhere. An overlooked smallcap agri stock Murray River Organics Group (ASX: MRG) was the strongest contributor to the Fund's returns. It is one of two companies Equitable Investors has taken an interest in that have been shunned for the cardinal sin of missing prospectus forecasts. MRG's share price had flown as high as $1.32 in January 2017, shortly after its IPO. Then serial earnings downgrades resulted in the stock slumping as low as $0.27. Interest in the stock dried up. Its market cap is now just over $50 million and was about half that at its low point, with a $12 million capital raising assisting in the recent increase. The institutional research arms of the major investment banks don't cover it (although boutique PAC Partners is one that does). We've been attracted to MRG because, as a result of its neglect, it continues to trade at a discount to Net Tangible Assets, which are underpinned by farming assets in Sunraysia; and we believe MRG stands ready to deliver improved earnings should the weather conditions be more favourable in FY18.
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Martin spent a considerable amount of time as an investment manager with Thorney Group (run by billionaire Alex Waislitz). Very high caliber. This guy knows his stuff.
