Credit Suisse observes the company has made a solid start to FY20, although an increasing milk price could put pressure on earnings, which remains subject to volatility.
The broker observes, having largely dealt with the balance sheet issues, the investment case for Fonterra Shareholders Fund centres on what the business will look like in the future and how it will position with regards to its capital structure and relevance as a processor of choice in the NZ milk pool.
The broker expects further progress over the next 12 months on an exit of Brazil, a strategic decision on China Farms and potentially some product and market rationalisation.
Neutral rating maintained. Target is NZ$3.85.
Sector: Food, Beverage & Tobacco.
Current Price is $3.80. Target price not assessed.