CGC is Australia’s leading producer in the $8bn fresh fruit and vegetables market, the company operates over 3000 Ha of farmland, 7 mushroom facilities, and 20 Ha of glasshouse facilities across Australia in 4 core categories: Mushrooms, Berries, Tomatoes (glasshouse-grown) and Citrus. CGC enjoys the number one market share ranking in each of its core categories. The company operates offshore through JVs in Morocco and China and licenses its blueberry IP in the Americas and Morocco.
Unfortunately, CGC has become a regular disappointment to investors – MM included in past years – and after the latest challenging year, it’s now around a potential earnings recovery in 2024/5. Similar to insurance businesses CGC is vulnerable to the trials and tribulations of the weather making earnings forecasts a tough proposition and our concern remains with the company’s operational complexity. While it trades on 17.3x, a slight discount to its longer-term average, it’s not excessively expensive and they have a good asset base that could be attractive in the right hands. An estimated 4.9% yield over the next 12 months also helps.
- We can see CGC testing $3.40 over the coming years making the risk/reward below $2.50 attractive.
MM is mildly bullish CGC under $2.50
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