A strategy focused on actual businesses with momentum can repel market volatility. Importantly it can help you ride out any volatility because you understand that a "tweet" doesn't translate to any effect on profits.
The dry conditions in many of the key farming regions highlight the importance of water security for our listed agricultural plays. When it comes to water rights, some are in a better position than others.
FY19 results were ahead of UBS estimates at both the earnings (EBIT) and net profit level. Strong cash flow has allowed the company to pay down all debt and provides for a material future growth option.
FY18 results materially missed forecasts because of a lower almond price. A record US almond crop and the trade tensions have caused the price to fall recently. Select Harvest's FY19 crop estimates are up 7.8% on FY18.
Morgans believes the company should achieve at least the top end of its pool price estimate of $8.10-8.50/kg, reflecting positive industry fundamentals and a falling Australian dollar. Morgans upgrades forecasts, given the company’s strong operating leverage to rising almond prices.
The company has issued materially lower guidance for FY17 net profit because of a lower Australian dollar almond price and cost pressures. Morgans consequently downgrades FY17 net profit forecasts by -40.3% and makes material revisions to FY18 and FY19 as well.