GNC - Graincorp Limited

[skc]

No idea why GNC is trading so strong this morning... they reported pretty poorly last month and there's plenty of event hedge fund (40% of register apparently) looking to unwind, yet it's all one way traffic from the open.

Time to short me thinks.

 

[rcm617]

Maybe investors think that if ADM saw value at $12.20 plus another $2 per share in commitments to extra capital expenditure, the shares might be worth a bit more in the long run than the $8.70 they traded at before the bid.
Management may try and screw a bit more profit out of operations.

 

[notting]

Maybe ADM are buying it on market, increasing their stake, as newly permitted to, to hold till labour gets back in!
That's what I'd do if I thought it was worth the price!

 

[piggybank]

Will short the crap out of it if it opens anything higher than it's trading price prior to bid.

We will have to wait and see what Monday brings...

 

[So_Cynical]

In with the superfund today at $7.59 ~ time will tell of course but the chart below explains my thinking, ignoring the take over share price and the lead up to it, with rumours and insiders buying and consider that at today's 24 month low the price would seem to be on the cheap side.

3 year chart shows Graincorp averaging at around the 7.50 mark in 2011, now consider that the global economy has picked up considerably and that Graincorp is a considerably better business than 2/3 years ago, Total liability's and debt are up a little (around 15%) while revenue has increased by around 60% and revenue streams have diversified further.

On a simple like for like comparison i reckon GNC looks cheap, have to wonder just how much the removal of any TO premium will subdue the SP.
~

 

[DrapSnagon]

Agree.

I like this and have done for a while. I bought into a parcel in July 2012 at 919c, and was somewhat gutted to have to sell into the ADM bid at 1224c in October that year. On the face of it, that was a good trade, but I didn't buy it for a trade:- I expected it to form a cornerstone of my exposure to agri-business for many years. Very annoyed.

At the time [and even now] there are precious few opportunities for exposure to this sector on the ASX. I don't like Ridley or AAC or Nufarm, so I ended up taking a position in BGA. Then that ran away before I could build it into something meaningful, so another door closed. TGR is still on watch but it has never fallen far enough to be attractive. I finally ended up with IPL, but that took another 12 months and I still wasn't pleased with the outcome.

So I was a happy camper when Graincorp came back on the radar recently at 820c and happier still to stake out an initial buy at 796c. Completed the holding today at 754c and I'm now at two-thirds of my planned exposure to the sector.

Everything I see values GNC at $8+ {consensus is closer to $9}, even with the drop in FY14 EPS which the experts say is transient. The need for capex is a worry (ADM would have taken care of that) because they might tap the market at some stage, but I can live with that. The overhang of ADM is also probably concerning people, but I can live with that too:- they've demonstrated they don't abandon equity positions just because a bid failed, and certainly not at firesale prices.

​

Another downside is the loss of Alison Watkins, who imho is a very capable lady. The idea of her having to deal with Federal Government intervention [or the lack of it] in two different companies for two totally different reasons in the space of a few months is just bizarre. No way would I swap jobs with her. What other CEO in recent memory had to put up with that?

But I digress ...

Around $7 ½ GNC is in the money for me at a grossed-up yield of 7% and plenty of headroom in growth to consensus targets.

I'm with you on this - I guess we sink or swim together

Snap

 

[Zedd]

^ +1

I took the short term profits during the takeover bid, but quite happy to see it knocked back as this is one of my favourite core holdings. I can't see the current situation lasting though and it's a matter of time before GNC is involved in a large M&A. I'd rather see it look to expand its international operations with a large acquisition, but it's more likely IMO that the board will look to run a tight ship to continue to maximise takeover attractiveness and simply wait out / lobby the government.

 

[So_Cynical]

(5th-February-2014) In with the superfund today at $7.59 ~ time will tell of course but the chart below explains my thinking, ignoring the take over share price and the lead up to it, with rumours and insiders buying and consider that at today's 24 month low the price would seem to be on the cheap side.

A little over 3 months later and today Graincorp touched $9 per share on the back of the HY2014 results, 15c per share dividend and full year guidance confirmation.

http://www.graincorp.com.au/_literature_165247/HY14_Results_Presentation

 

[So_Cynical]

Over 2 and a half years later im still holding, price retreated all the way back down to $7.50 and now its gone all the way back up to $9.70, top of the range again...probably should sell as the dividend isn't worth it, not sure why i didn't sell last time...
~

 

[sptrawler]

Over 2 and a half years later im still holding, price retreated all the way back down to $7.50 and now its gone all the way back up to $9.70, top of the range again...probably should sell as the dividend isn't worth it, not sure why i didn't sell last time...
~
View attachment 69494

Maybe you're holding for a Chinese buy out. lol
For that to happen, there would have to be some strategic upside, which eludes me.
But as with a lot of our transport companies, having a large footprint, interests overseas companies.

 

[So_Cynical]

Non binding blah blah blah at $10.42 a very nice jump in the SP, interesting and somewhat expected that the offer isn't fully priced into the SP due to the last rejection.

 

[The Triangle]

I'm happy with the bump. Thought it might tick up to $10.00 but it has not. My usual rule is to sell half on any initial takeover offer/confirmed rumor. This does feel like a fake or predatory offer to flush out others willing to pay a higher price especially as it comes after a poor season, in a down market. Could not imagine this company going for 10.42

 

[The Triangle]

Gone entirely out of this one. Nothing against graincorp, just taking the capital gains and investing elsewhere. Oddly I think the LTAP proposal values the company too low - either a revised offer will come (which I'm happy to miss out on) or the offer will not materialize and the SP will fall back down. Still trying to understand the bulk oil terminal sale - I don't have an opinion if its good, bad.

 

[The Triangle]

Ahh yes. The takeover offer by some unknown lads has failed... "LTAP is unable to proceed". Very interested to see where the SP ends up by the end of the week. High 7s?. I'll very likely be back in to GNC before June. I'm a fan of splitting the company in to various pieces.

 

[The Triangle]

GNC was in the low 7s last year at this time before the failed TO was announced. It's now back to the low 7s but facing a 65 $m ebitda, losses for this year, and no dividends (possibly for the foreseeable future). Far worse looking than 12 months ago. Although these earnings issues may be temporary the valuation for this company is way too high. I dont see this staying above 7 once the earnings report is out this month.

 

[So_Cynical]

Although these earnings issues may be temporary the valuation for this company is way too high. I dont see this staying above 7 once the earnings report is out this month.

Agreed - the only positive for shareholders is the Malt spin out.

 

[The Triangle]

This is still overvalued. The demerger presentations with maltcorp are complete with a lot of corporate doublespeak. Both separately are going to be too small to just sit there and pay dividends consistently at a high return. With the asset sales, I think we'll see the corporate costs relative to market cap jump up.

Growth according to their own presentations is at the bottom of the priority tree - so why invest in either one? Even at a 70% payout, I doubt there would be much more than 2.5% if you look at the last 6 years. And if you look at the last 6 years - there has been nothing but sideways movement. If I had to pick I would prefer maltcorp - should be interesting to see where it trades next month.

 

[Dona Ferentes]

Several major Australian grain groups have issued a joint statement today saying the industry understands China is "potentially proposing to place tariffs on barley imported from Australia as a result of their ongoing anti-dumping and countervailing duties investigation".

"The yet-to-be-finalised tariffs may include a dumping margin of up to 73.6 per cent and a subsidy margin of up to 6.9 per cent for barley imported from Australia," it said.

The subsidy claims are understood to refer to Australia's fuel rebate and drought support measures, and together with the dumping tariff would effectively put an end to Australia's barley trade with China. Government sources suggest the investigation could be used as a cover to impose the tariffs, in retaliation against Australia's push for the COVID-19 inquiry...

https://www.abc.net.au/news/2020-05...nsion-barley-tariff/12232426?section=politics

https://www.graingrowers.com.au/update-on-china-anti-dumping-investigation/

This has been around for a while; statement below is from Nov 2018
https://www.graingrowers.com.au/joint-industry-statement-china-barley-anti-dumping-investigation/

 

[wabullfrog]

Has had a big bounce today, last I saw was over $3.80

 

[peter2]

GNC: Significant break-out potential. Price has been stuck in a range (3.00-4.50) for a little under two years. The price data is a little spotty due to the demerger of United Malt (early 2020).

Investors and traders have to accept future agricultural risks (weather) and a truculent China.