Mark Allison decided to stay on and postpone retirement, yet the share price still hasn't lifted

So looks like there is still some uncertainty regarding succession planning.

Approaching deep value now - one to watch for any unusual coporate activity?

My personal thoughts only and I could be wrong

Elders punished today on lower than expected results and a cut in dividend. 13% down move very unusual for a consumer staples business.

One notable metric is EPS. Looks like Wilsons was correct to make the 0.75 EPS estimate for FY23.

Sentiment on the call was negative

Source: factset

Need to think beyond the Eight Point Plan.

I'll be more keen if Elders started looking at some overseas opportunities and look at overseas rural markets instead of focusing on the Australian markets. Would be a hard task though and I admit Elders probably knows more than me on how to run a rural business.

While Qantas has been super quick to appoint a new CEO, I wonder why it is taking so long for Elders in finding a replacement for Mark Allison and a replacement CFO.

Starting to think if there is some link to the February closed doors announcement.

Since the announcement, Ag prices have come back down more although they seemed to recover somewhat last couple of days as restocking season starts.

But am starting to think that Elders may be overestimating their guidance for the first half FY23.

Have exited for now after realising maybe Elders doesn't offer the diversification and safety in the Ag sector amidst falling prices and La Nina ending while seeming to be running on "autopilot". Not a good decision averaging down here. On the other hand, should a new refreshing strategy emerge then definitely worth a revisit.

Hopefully Elders does find someone that can manage the through the headwinds of falling prices, drier weather, shifting global markets etc.

Slide in Wagyu F1 prices puts pressure on supply chains

https://www.beefcentral.com/news/slide-in-wagyu-f1-prices-puts-pressure-on-supply-chains/

May be related to the weakness in Elders recently along with other cattle price indicators (trading like crypto at the moment)

But it is weird that prices have not carried through to the supermarket.

Currently trading around 8-7x earnings but analysts have downgraded EPS expectations significantly recently with some at 0.75 (bell potter) and 0.68 (Wilsons).

A pretty hefty downgrade and the dividend investors won't be happy about that.

Also I haven't even mentioned wheat prices - seems the Americas is forecasting a good season versus Oz

Lots of selling last 12 months including some European institutions such as BNP, Aberdeen and hedge fund Victory. Plus , Commonwealth Super Corp (not CBA).

Few insiders there too including Richard Ian Davey (former chariman). Not sure who Podmont and RCW Rural is.

Looking at the target prices again. One from Goldman

One thing to note is Wilson seems to be spot on with their target prices on Elders and Pro-medicus. Might be worth listening to Wilsons.

Source Capital IQ Pro

Still not the time to buy.

Very noble of anyone holding against all this selling.

[held]

Bell potter has been busy...

There's a price target of 7.20 from Wilsons

Really powerful stuff from Capital IQ. Really hope this is a lifetime membership.

[held]

Correlation between ELD and the EYCI (Eastern Young Capital Indicator)?

From the chart it doesn't look like cattle trade (or any other Ag sector) is "recession proof".

But looking at the slight uptick at the end I wonder if the bottom is in

Chart source from marketindex

[held]

Not sure what was in the private briefing. Despite the bullish comments it seems investors came out unimpressed?

These are the top most recent sellers (Tikr):

Estimates from factset which appear to be lower:

I'm lucky that I held fire and didn't buy when the price started falling.

I'll still do nothing here despite what is given in the statement. A few headwinds I can see for Elders. Rate hikes will affect their real estate business. Lower rainfall from weakening La Nina.

But I'm no climate expert and who knows - will warmer climate and melting icecaps give way to more rainfall in spite of La Nina?

However I'll take a risk here and have added to Strawman.

[Held}

Response to price query from the ASX

Interesting snippet from briefing with "institutional investors" as opposed to retail (not a good look??)

Wonder if this was a overreaction given the last sentence?

However, ELD does note that the Company held two investor briefings yesterday with a number of institutional investors. No price sensitive information was discussed at that briefing. The following sector-wide factors, all of which is information in the public domain, were discussed with investors:

(a) current livestock prices which have declined from historic highs, but which remain above long term averages;

(b) the impact of the unseasonably wet conditions, which affected much of eastern Australia in the last calendar quarter of 2022, on cropping and livestock turn-off. The lateness of the season is likely to have an impact on competitor activity.

(c) softer real estate sales activity which is likely affected by the rising interest rate environment;

(d) the strong winter cropping outlook due to excellent levels of sub-soil moisture and water availability in the east of Australia; and

(e) succession of the Managing Director and Chief Executive Officer (MD & CEO) following ELD’s announcement, on 14 November 2022, that the current MD & CEO would retire on or before November 2023.

Factors (a) and (b) were referred to in ELD’s full year results announcement on 14 November 2022. In addition, ABARES has released periodic information regarding cropping and livestock outlook and Meat and Livestock Australia periodic information regarding sheep and cattle prices.

The factors (a) to (d) suggest that ELD’s second half performance will be stronger than first half performance in FY23.

My guess is some large ETF fund is exiting, possibly Betashares but it could be overdone given the answer at the end.

[held]

Elders gets hit by UBS analyst downgrade sending shares diving

Analysts at UBS on Monday issued a research note outlining reasons for downgrading Elders to neutral from buy and cutting its target price by 25% to A$11.30 a share.

UBS analyst Evan Karatzas said the potential for Elders's share price to outperform could be challenged in the near term. He attributed this view to the company having a more subdued earnings growth outlook, combined with management uncertainty due to the announced retirement of Chief Executive Mark Allison.

"To return to a positive stance,we look for a greater level of earnings growth visibility as well as future management clarity," said Mr. Karatzas.

Looks tempting to top up but I'm chasing other opportunities.

[held]

Still trying to get my head around the 22% drop in price

Most sources I'm reading are stating the price is dropping because Elders are not quite sure of the outlook due to the rains on the east coast of Australia rather than the CEO leaving which appears to be an orderly transition as he is retiring next year and not suddenly departing.

It seems any company that is giving unclear guidance or getting it wrong is getting punished.

However we've known about the east coast flooding for a while so it is odd the way the share price is reacting to the news now.

Seems like a bargain. But I'm going to wait for the share price to find a base.

[held]

Elders (ASX: ELD) -4.04% fell on reports that China had put a (temporary) ban on Australian and NZ beef imports. From what we understand, there may have been a 12-hour ban on customs clearing of Australian beef, dairy and grain before it was overridden by a “higher power”.

I'm not sure why Elders falls on this bit of news as I thought exports only amounted to a small percentage of the main business.

A bit of overreaction here, as Graincorp and Australian Agr Co did not fall this much.

I feel I'm loaded up too much on Elders so won't be adding unless it goes below my average cost price and maybe there's better stuff elsewhere.

Held

Elders falls on FMD fragments found in imported goods?

Probably likely given the fall today when it was initially up on a green day.

While the FMD news lurks in the background, I think Elders is a shorters paradise now.

Foot-and-mouth disease fragments detected in meat imported to Australia

https://www.abc.net.au/news/2022-07-20/foot-and-mouth-disease-fragments-detected/101254410

I agree it will be a big hit if the real thing (and not fragments from cooked products) does arrive in Australia (about 40 billion plus).

Still holding

Bell Potter who has downgraded Elders to Hold on the basis of wool volumes decreasing (and perhaps partly responsible for putting pressure on the share price):

Wool agency indicators: Industry wool volumes have slowed, with YTD volumes down -3% YOY and down -10% YOY in 3Q22 (after being down -1% in1H22)

However a more bullish forecast from wool.com

Not sure who to believe...

held

Spoke too soon

Blackrock back to substantial at 6%.

Also my guess why Elders is underperforming is the due to the cash outflow for last 6 months which I failed to spot earlier. Looks like markets never like increases in working capital to "secure" supply of products for future sales especially in a potential recessionary environment.

[held]

One of the Directors Matt Quinn bought some last week

After initial spike, share price is back down again. My guess is Blackrock is still exiting - they are no longer subholder.

[Held]

Good to see my discount cash flow model that I did last year for my university assignment has been beaten by the latest HY22 results

Will need to do a new one now :) The challenge is trying to fit the double digit growth projections into the above model.

Also being a cyclical rural stock heavily dependent on favourable weather factors and commodity prices, I have a feeling lots of holders sold into this rally thinking this is as good as it gets.

Held.

Wool market on red hot run as prices lift more than $3 a kilogram

From ABC. Might explain the run on Elders stock

Wool market on red hot run as prices lift more than $3 a kilogram

DCF calculations for Elders Valuation

Made a mistake in the last valuation as I forgot to add in the interest tax shield.

Tried to be as conservative as possible with the revenue growth and dividend as I found these have a big influence on the price rather than the carried tax losses.

Share price updated from 11.30 to 12.15.

Screenshot attached with all calculations. I opted for a screenshot as the spreadsheet was part of the assessment which I was not comfortable to share publicly.

HY21 Results Summary

9% CAGR in revenue which is higher than FY20.

Think the selloff is driven by the consumption of all tax losses by 2025 which has been the driving factor behind net income growth for the last few years (in the income statement the difference in tax losses against the tax bill get added back as income). I hinted at this in my last valuation which I will update later once I get my valuation marked. This is what you get for investing in a turnaround play where there were lots of skeletons in the closet! Flipside of this is better visibility of the results going forward which I'm sure all analysts are factoring in for all their price models which may not have been done before.

See slide number 13 for summary of the tax loss offset against the tax bill

Other factors contributing to the fall include easing prices in livestock and wool prices for the medium term.

Seem pretty bullish on real estate with land demand up 35% and supply down 25%.

Dividend increase (but no franking this time) compared to the grossed up dividend from PCP.

https://investors.elderslimited.com/DownloadFile.axd?file=/Report/ComNews/20210517/02375142.pdf

Overall a mixed bag with growth but some benefits (the tax losss offset) about to disappear. Selloff could be a slight overreaction.

Holding ELD (bought last year $10)