Select Harvest

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Company analysis & Market research
Company Details
Select Harvests Limited
ACN: 000 721 380
Chairman: Michael Iwaniw
MD: Paul Chambers
360 Settlement Rd
Thomastown, VIC 3074
Tel: +61 3 9474 3544
Fax: +61 3 9474 3588

Executive Summary

Select Harvest Limited is an Australian company listed on the Australian Securities Exchange. Its main business operations are the producing, manufacturing, distributing and marketing of almond products. The company has over 11 000 acres of its own orchards (either owned or leased) and manages a further 34 000 acres. The share price has experienced severe fluctuations over the past, from a high of around $14 in 2005 to the current share price (as of 21/09/2012) of $1.14. The severe decline in the share price is due to numerous external factors, namely the impact of the high exchange rate on the price of exports and poor weather for growing crops. Despite results from the 2011 financial year showing a substantial loss, the overall industry outlook is a strong and positive one. Furthermore, Select Harvest is in a good position to benefit from industry wide growth along with their competitive advantages. Therefore, the final recommendation is to proposal Select Harvest as a valid and potential profitable investment to clients.

Question 1
Select Harvest Limited is a company that grows, manages and markets almonds. The company has 11 000 acres of its own almond orchards, which are both owned by the company or leased from others. The company is also involved in managing orchards owned by third parties, and is currently managing over 34 000 acres. Select Harvest also has a facility to sort, process and package goods for sale. Finally, the company is also involved in marketing almond products in an effort to increase consumption of its own almond products and increase sales. Question 2

a. The chairman of Select Harvest is Michael Iwaniw. Iwaniw has served as chairman since November 2011 after joining the board in June earlier that year. Iwaniw’s career began as a chemist at the Australian Barley Board where he became managing director in 1989. Under his management it grew to be valued at $1.6 billion and was subsequently taken over by Canadian company Viterra. As well as being on the board of Select Harvest, Iwaniw has also served as a non-executive director on the boards of Toepfer International, New World Grain, Australian Bulk Alliance, 5-star flower Mill and Australian Grain Growers Cooperative. b. Paul Thompson is the Managing Director and Chief Executive Officer. Prior to joining Select Harvest, Thompson was President of SCA Hygiene Australasia, a company with a turnover of more than $600 million. Another career achievement was the position of Director with the Food and Grocery Council and as a councillor in the Industry Group. c. Select Harvest currently has sharers held by 3 359 investors.

Question 3

a. Market capitalisation = (Number of fully paid ordinary shares) x (Share Price). = $1.14 x 56,812,699
= $64,766,477

b. PE multiple (based on full-year earnings for the latest full-year results reported) PE = (Share Price) / (Earnings per Share)
= $1.14 / $0.337
= 3.38279

c. Dividend yield (based on the dividend for the latest full-year earnings reported) Dividend yield = (Dividend per Share) / (Share Price)
= $0.08 / $1.14
= 7.0175%

d. The Bid-Ask spread (as of 26th September 2012)
= Ask price – Bid price
= $1.14 - $1.13
= $0.01

e. Enterprise value (EV)
= Market capitalization + Net debt
= Market capitalization + Interest bearing debt - cash
= $64,766,477 + $16,458,000 + $64,000,000 - $7,398,000
= $137,826,477

f. EV/EBIT multiple based on the latest set of full-year results = Enterprise value / (Net profit before tax + Net interest expense) = Enterprise value / (Net profit before tax + Interest paid – Interest...
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