Scales - SCL

[axe]

Hi w69, what makes you think that F16 will see a greater impact of the lower nzd?

Posted Earlier but there should be more acreage of premium varieties coming on stream. Exert below is from SCL.
"
It is estimated that a general increase of five cents in the value of the New Zealand Dollar against other foreign currencies would have decreased the group's profit after income tax by $10,159,000 (2014 $5,947,000). A decrease in exchange rates would have the opposite impact on profit. "

[noodles]

I ment variation in USD and compared to the volatility in milk powder we have witnessed recently.

What you see there is presumably largely off the back of a low NZD and I agree FY16 should be better, the presentation mentions that based on their hedging FY16 FX should be slightly more favourable than FY15.

Long term lets not forget that even premium apples are still a commodity.

Disc: have been holding since mid last year

I don't think apple prices were particularly favorable for Scales in FY15 (especially in USD).

	2010	2011	2012	2013	2014	2015
Av g NZ$ price / TCE	28.6	26.9	24.4	28.7	27.0	27.2
Av g USD$ price / TCE	20.6	21.3	19.5	23.3	22.3	21.8

Shipping rates were very favorable.

Yes it is a commodity. But we have not seen any major price uplift. Thus we are not yet seeing any major supply response from Chile or South Africa.

[noodles]

Here is how I see the next 9 months going for Scales:

1.Current State:
Brokers (and Scales) are currently forecasting a reversion of earnings for FY16. Broker estimates are currently at eps=21.6c and target price of $2.85
2. After AGM or late May:
Management will have a better handle on pricing and volumes. They will upgrade guidance, but will still be conservative.
Brokers will update their DCF models and issue a target price of $3
3. December Update:
Management will give their Fy16 forecast with eps exceeding FY15 by about 5%
Brokers will again update their DCF models and issue a target price of $3.25

Wildcards:
1. Scales have a takeover offer. This will bring forward the December forecast
2. Scales acquires a non-apple business. If this is eps accretive, broker target price's should rise.

The above is pure speculation based on what I know about management and the current apple volumes and supply/demand profile.
It is not a recommendation to BUY.
I hold Scales (and have since late 2014)

[Lewylewylewy]

THIS IS not A RECOMMENDATION TO BUY. Lol good use of subconscious CAPS

Both those wildcards are very positive.

Personally, I'm currently in denial about the value in the current price, but it's supported in the PE. Sage reminder of the value here and good summary about what's going on.

Think I'll still wait to see if it drops a little before buying in any more. Might wait for Couta's bomb to drop before wetting my whistle with a drop off cider.

Appreciate your opinions, analysis and ideas, as always.

[LAC]

Brokers working with an eps of 21.6 have a target of $2.85 (pe 13)
Which would mean @5% above FY15 = 28.9 would make the target more than $3.25 unless they are not using 21.6c as their eps in their current target price.

[noodles]

Brokers working with an eps of 21.6 have a target of $2.85 (pe 13)
Which would mean @5% above FY15 = 28.9 would make the target more than $3.25 unless they are not using 21.6c as their eps in their current target price.

$3.81 in fact.
I think that brokers will always err on the side of caution with volumes and pricing for apples due to the risks with the industry. They will likely consider FY16 a better than normal year and use lower assumptions for FY17, Fy18.

But this is all 'finger in the air stuff' anyway.

[winner69]

Hi w69, what makes you think that F16 will see a greater impact of the lower nzd?

The company says so

[winner69]

I don't think apple prices were particularly favorable for Scales in FY15 (especially in USD).

	2010	2011	2012	2013	2014	2015
Av g NZ$ price / TCE	28.6	26.9	24.4	28.7	27.0	27.2
Av g USD$ price / TCE	20.6	21.3	19.5	23.3	22.3	21.8

Shipping rates were very favorable.

Yes it is a commodity. But we have not seen any major price uplift. Thus we are not yet seeing any major supply response from Chile or South Africa.

Those numbers different from Annual Report

Or are we looking at different things?

[drcjp]

I consider this a significant bit of purchase info considering the entire operations of SCL. Mr Sainsbury can see what's coming via CR methinks.
https://www.nzx.com/companies/SCL/announcements/279900

[Beagle]

And we have plenty of growth yet to come – in our Horticulture division we will enjoy a large increase in our productive orchard capacity over the next three years as redeveloped orchards come to full production, and in our Storage & Logistics division we will enjoy a full year of trading from our latest coldstore in Auckland as well as a number of other initiatives that came to fruition in the second half of 2015.
Scales is in a strong and exciting position with a clear path to ongoing growth.

Nice introductory statement in the annual report.