whats webster worth?

A very subjective question I know.

The market thinks 47 cents currently. But maybe it has it wrong.

Current Webster Shares 64,597,159 @ 47 cents = Market Cap of $30.36 Million

Tassal Shares Held 28,139,372 @ $1.65 = Market Value of $46.429 Million

From the 08/09 annual Report Tassal carrying cost was $45.919 million with associated Deferred tax of $7.675 Million.

Market price of Tassal shares per Webster Share = 72 cents

Cost Base of Tassal shares per Webster Share = approx 31 cents.

The difference between the market price and the cost base would be taxable. The tax payable will depend on how Webster deals with the shares. A realised gain in their hands would attract a 30% tax rate. Distributes to share holders tax would be variable depending on people's circumstances. Those holding in a super fund would be taxed at 15% in accumulation or 0% if in pension phasae. CGT discounts may also be applicable etc etc.

The following is again based on the 08/09 annual report. The half yearly report is more recent but less meaningful because of the seasonality of cash flows

Subtracting Tassal from the Balance sheet:
Total Assets = $52,744
Total Liabilities = $32,993
Equity = $19,751
Equity per share = 30 cents.

Tassal stake at 72 cents plus equity post tassal at 30 cent = $1.02 (less tax consequences for TGR stake)

Whats the business without Tassal worth?

Firstly the debt to equity ratio would be approx 120% the company has said it targets a ratio of 40-45%. Debt would need to come down. (from 23 million to approx 9 million) If the business can not throw off enough free cash flow than the possibility of a capital raising is a risk.

The Gunns strategic review is a threat (but also a possible opportunity). I dont see an orchard sitting comfortably which ever way Gunns is sliced up. I would think they will look to sell. What happens to the management rights under a new owner? This is a similar situation to what SHV faced with Timbercorp sale of almond orchards. Websters could look to buy the orchard itself but would require a capital raising. Im guessing Peter Joys thought's being both a large Webster holder and an adjacent orchard owner could be pivotal.

Looking through old reports Webster walnut division (excluding the Tasmania orchard) reported an EBIT of $2.357 million for 07/08 and an operating profit of $5.5 million in 06/07 both years included planting of 800 hectares. For 08/09 the Tasmanain orchard was lumped in with the management business and a combined EBIT of .22 million was recorded.

I dont know and can't even closely guess what ongoing management income will be generated by the walnut management business. The MIS shambles meant no new plantings last year and Im guessing not much this year either.

The company owned Tasmanain Orchard looks like its about to finally start delivering. It seems to have only ever contributed losses so far but this years crop looks good and above forecast. A wild guess here but perhaps its worth a couple of Million EBIT.

From all I have seen on Onions this year it looks like a smallish crop but good quality. Good prices but high dollar.

Carrots, I havent seen much and dont expect much from them this year. Hopefully the carrot processing line is sorted and an average return can be achieved.

Onions and carrots are both weather dependent one good year in four is about all you could hope for. I dont think this is the good year But its not shaping up to be repeat of last year either. Overall this business doesnt really excite me like the walnuts do but a reasonable return on capital is possible if you are prepared to sit through the vagrancies of nature. Potentially this is a safer area to be long term than in the hot resource sector. People have got to eat and you've got a natural hedge against a falling dollar if the Aus economy does stumble.

Historically the Fresh division returned an EBIT of $2.457 million in 07/08 and $2.8 million in 06/07. This represents to me an average sort of season.

A Rough back of the envelope calc to see if the 30 cents equity post Tassal is justified.

Walnut Management $1 million????
Company owned walnut harvest $2 million
Fresh Business $2.5 Million
Investment Property rental .5 Million
Interests (-$1.5 Million)
Unallocated Costs (-1 Million)
Tax (- $1 Million)
Normal Year Profit = 2.5Million or approx 4 cents per share.

PE of 10 gives 40 cents. + Tasall stake at 72 cents less tax.

All in all I reckon Webster is available at less than half my estimate of its value. There are some risks because of the debt, Gunns strategic review and mother nature but there is also some very good upside potential in Walnut and Fish growth.

This post contains a lot of assumptions on my part happy to hear from anybody with alternative assumptions or better still facts, goodness knows the company provides few facts outside the annual report.

Cheers