Originally Posted by
noodles
Scales is now my largest holding. I simply don't see much in the way of short term downside.
-With 33% of apples sold, it looks as if prices and volumes are holding up on last year.
-The coolstore business has bounced back (as expected) after a poor 2014
-The currency fall against many of the trading partners (but most importantly the USD) will really drive profitability going forward.
Therefore I expect FY15 PFI forecast to be easily beaten. I estimate they are currently trading on a FY15 pe=10. I also expect brokers are being very conservative with their forecasts. Thus I see broker upgrades by the end of the year. Currently, the average broker target is $2.
They will pay 12c of dividends and 4.7c of imputation credits = 16.7c in the next 6 months. (dividend strippers take note)
Going into FY16, there are many growth initiatives in plan to keep the momentum going. The major initiatives are:
-increased premium apple supply
-$30m Auckland coostore
If they do reach the 12 months broker target of $2, there would be 27c (share price appreciation) + 16.7c (dividend) = 43.7c return on the last close of $1.73. That is a potential 25% upside. But given I think broker estimates are conservative, that may just be a starting point.
Recent drop in the currency provides a nice breezy tailwind and probably more to come with further OCR cuts.
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