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Will be priced within an inch of fair value...modest growth and low margins
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Couple of franchised restaurants/fast foods have long supply contracts with Tegal. As well as supplying Halal chicken to certain restaurants
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Originally Posted by KW
Chicken is bloody expensive in this country. I am in on anything that gets away with such blatant price gouging of consumers :-)
As an example, A KFC Ultimate meal is $9.95 in Australia, and $14.50 in New Zealand - a 50% difference. (Whereas Burger King is pretty much the same price in both places).
Making $11m on half a billion dollars of revenue doesn't seem like blatant price gouging although being lumped with a highly geared balance sheet and $35m of interest isn't helpful.
Literally, shiploads of chicken feed in NZ is imported whereas there is a lot of grain grown in Australia and if they have wet conditions prior to harvest, this can result in a lot of wheat ending up in feed rather than as baking grade. NZ is also up against the Chinese domestic market in terms of their needs for feeding the chickens for their consumption - it's staggering to understand how many chickens they consume daily now that the growing middle class is pursuing protein rather than carbs for their dietary requirements.
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Although I don't know alot about (nor plan to research to far into) Tegeal... I will not be touching this one (anyone else smelling Hirepool 2?)
Seems like an extremely low net profit margin, with a 'medium' PE given what I expect will be relatively low growth (if any), and I haven't even begun considering other balance sheet factors, the factors that ultimately brought down DSE (like debt).
Not sure if there is export opportunities that could 'boost' growth, but I would be cautious. For me, a good dividend yield, that the institutions will like in this seemingly ever decreasing interest rate environment, is the only thing that will 'get it away'... and in my view that is a dangerous thing to be 'buying the yield, not the company'
Last edited by trader_jackson; 09-03-2016 at 08:39 PM.
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Has any one compared this with Pro Ten on [NZ] Unlisted market.
Market cap $118,5mil ,PE 15,6 and dividend yield of 4.6%.
ProTen grow chickens in Australia.
I have stayed away as I think it is a fowl industry to be in.
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You wouldn't want your chickens to come home to roost if the ipo fails.
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Over the ditch, TPG sunk $900m into Inghams in 2103 and are apparently looking for an out... rumours are it'll IPO this year too. I guess the irony is that they'll be cheering the competition on for a positive listing.
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