MM thoughts on SHV

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Question asked 21/02/2021

MM thoughts on SHV

“Hi James, Select Harvests “SHV” is a Company from Western Victoria which is an Almond Orchard Producer & Marketer. The region produces the second largest amount of almonds in the world, second only to California, USA, where I understand some of their orchards are under pressure in being replaced by vineyards. They have some China sales exposure but not extreme I believe. They have undertaken a planting program which will see these immature trees reach maturity in the next 2-3 years which will increase output. They just secured further water rights through an acquisition financed by a placement at $5.20. I would appreciate your thoughts on the Company now and going forward please.” - Many thanks, Mark B.

Answer

Morning Mark,

Things do indeed read well on the surface for SHV but with agribusinesses in general they often find themselves at the vagaries of the unpredictable weather. Last year was a tough one for SHV after ideal growing conditions in the US led to the oversupply of nuts and hence lower prices, although they still felt expensive in my supermarket! These lower prices were compounded by higher water costs and some shipment delays – the story reminds me of the journey for Costa Group (CGC) which fell 75% from 2018 before doubling post COVID.

While revenue is expected to increase this year, costs are rising and this is impacting profit in the short term which is expected to decline ~30% in FY21 before bouncing back in FY22. Hence, given this is an FY22 story we have time on our side and may get a chance at lower levels.

SHV

MM is neutral SHV

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Select Harvests (SHV)

LAST UPDATED 21/02/2021 16:22

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