It looks like investors are finally wakening up to the fact that future strong growth will come from companies exposed to China's move from a production based economy to a consumer based economy. The food sector is in the box seat to benefit from this fundamental shift in demand. I expect this realisation to impact all food sectors, not just dairy.
This article( hereunder ), in today's Australian, refers mainly to dairy but I would be inclined to include Seafood, Fruit/Veg, Beef and other agricultural commodities in this assessment. Further more, I view the recent rise in the asset values of these entities as " very much the beginning" with the real gains yet to come!
Disc- Opinion only. Invested in MGC, CGC, AAC, WBA, TGR, HUO and CSS. DYOR.
QUOTE:
ASX dairy stocks end year on high, buoyed by Chinese demand
THE AUSTRALIAN
DECEMBER 31, 2015 12:00AM
Investors have flocked to listed dairy stocks for exposure to China’s insatiable *demand for *export-oriented food plays.
Listed dairy shares have ended the year on a high due to Chinese demand for Australian food products.
Investors have flocked to listed dairy stocks for exposure to China’s insatiable *demand for *export-oriented food plays.
Listed dairy shares have ended the year on a high due to Chinese demand for Australian food products
Listed dairy stocks are ending the year on a strong note, as *investors flock to the sector for exposure to China’s insatiable *demand for *export-oriented food plays.
The biggest winner, dairy farm consolidator Australian Dairy Farms, has seen its shares soar 200 per cent after Tuesday’s *announcement of an $11 million deal to buy Victorian processor Camperdown Dairy Company.
Shares in processor Bega Cheese also bounded to a record high of $8.13 in morning trade, having climbed 25 per cent over two days. Late profit-taking saw the stock close 15c lower at $7.13.
Bega’s price surge has been *attributed to the halo effect of the runaway performance of infant formula and nutraceutical stocks Bellamy’s and Blackmores, on the back of extraordinary Chinese demand. In particular, investors appear to have woken up to the potential of a supply link between Bega and Blackmores, announced on October 29.
The duo has formed an equal partnership to develop a range of nutritional products, including high-quality infant formula, through Bega subsidiary Tatura.
Blackmores has a huge distribution presence in Asia across 25,000 chemists. “You see 60 Blackmores products on a big long wall and it’s easy for them to say here’s another vitamin E or infant formula product,’’ ruminated one dairy watcher.
Australian Dairy Farms’ phone has not stopped ringing with queries since it *unveiled the Camperdown deal, which creates the country’s only vertically integrated owner of farms and processing facilities. The company is only one of two local suppliers with quarantine clearance to sell fresh milk to China, on a seven-day turnaround.
Chief executive Adrian Rowley concedes the market is still small, with the firm’s shorter-term prospects focused on a white-label contract with Woolworths and developing its own brands for the domestic market.
The Camperdown facility is also running at less than half of its capacity of 36 million litres a year.
The rush to dairy has benefited the share price of processor Warrnambool Cheese & Butter, which is controlled by Canadian group Saputo after a spirited three-way takeover tussle in 2013.
With Saputo accounting for 88 per cent of the register and Lion Nathan a further 10 per cent, the shares are sparsely traded. Units in rival processor Murray Goulburn’s listed vehicle, the MG Trust, have also hit record highs.
Investors also have exposure to New Zealand’s Fonterra, the world’s biggest milk processor, through its ASX-listed Fonterra Shareholders’ Fund. Fonterra shares have been on the march since Novem*ber 30, when the company announced a new five-year deal to supply Bellamy’s with a range of nutritional powders.
Bellamy’s shares closed yesterday $1.46, or 9 per cent, lower, but not before hitting a fresh intraday high of $16.50.
One critic questions whether Bellamy’s $1.35 billion market valuation is justified by its modest performance: a net pro*fit of $9m on revenue of $130m in 2014-15.
Bellamy’s was the second-best performing ASX 300 stock this year, with a 750 per cent gain.