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Last edited 5 years ago
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Performance (69m)
2.8% pa
Followed by
8
Straws
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#Bull Case
stale
Added 5 years ago

Costa has had a tough time lately, and had to revise its guidnance which hit the price pretty hard.  The reality is that agriculture is a difficult and complex environment, but I think it is worth noting the latest update on horticulture from NAB Agribusiness. This is the market that Costa mainly operate in.

https://business.nab.com.au/in-focus-horticulture-june-2019-35500/

Citrus is one of the major sectors for Costa, and NAB notes that a major boost to Australian fruit exports came in the form of the China-Australia Free Trade Agreement (CHAFTA), which took effect in late 2015. CHAFTA has improved market access and lowered tariffs, particularly for Australian citrus. The value of Australian navel orange exports doubled in the three years since the agreement was signed, and the value of mandarin exports tripled over the period.

Table grapes is another area of focus for Costa and NAB say new opportunities in Asia have seen a resurgence in the sector. Table and drying grape production increased from 75KT/annum in 2011-12 to 164KT/annum in 2016-17, although pulled back somewhat last year. 

#Bear Case
stale
Added 6 years ago

Responding to the straw from Greyhound. I checked the 2017 annual report. The CEO's salary as per the REM report is $953k cash. The CFO's salary is $466. The rest is STI - probably not excessive for the size of the business, and the CEO has an excellent reputation in the market.

#Bull Case
stale
Added 6 years ago

Costa was treated pretty harshly for missing their production targets in Morocco with berries. This type of variation can happen in weather dependent production systems, though it should be noted that Costa are moving more and more to protectd growing models where they can.  With the price down to $7.50 they have a PE of 20.8 so not excessive for a "growth" stock

Longer term prospects are good, with new assets for avos and tomatoes, and an excellent market environment for citrus