Produce Investments - Core Organic Strength Central to Opportunity
Produce Investments (PIL LN, BUY, T/P 210p) announces today that Chairman Neil Davidson and Non-Executive Director Sean Christie intend to retire from their respective roles at the time of the company’s AGM in November. The company is due to release preliminary FY2017 results on 28th September. Trading remains in line with Board expectations according to today’s press release.Produce Investments enjoys a strong cash generative core potato business with significant opportunity to pursue organic growth ambitions through premiumisation in the case of Jersey Royals and to achieve mature market volume growth in the case of cut flowers – i.e. daffodils.
Cash generative strength in the core should be important for the company’s ongoing M&A programme. However, we would view positively a focus on bolt-on acquisitions with deal sizes that are arguably more compatible with the company’s current £47m market cap. A stated intent earlier in the year to look at deals up to £500m appeared unusually challenging.
As a result, investors should view positively an effective endorsement of the group’s organic strategy. The current senior executive management team comprises Angus Armstrong at CEO and Jonathan Lamont, Finance Director.
That Produce Investments’ upcoming results seem alright should be viewed positively. Moreover, the shares look attractively valued on a P/E around 7x and a 4.3% dividend yield. We base our share price target on an 8.8x calendar 2018 P/E. BUY.
Produce Investment is a holding company for the Produce Investment Group of companies, which grows, sources, packs and markets potatoes, daffodils bulbs and flowers. Co. operates through its fresh, processing and other segments. Fresh includes the sites, staff and assets that grow, source, pack and deliver fresh produce to customers. Processing includes the staff and assets that supply pre-prepared potato products which are sold as ingredients for food manufacturers. Other comprises the Greenvale AP Limited potato seed business; Greenvale AP Limited potato trading; Restrain Company Limited, an ethylene storage and ripening business; and Linwood Crops Limited, a potato trading business.
Whitman Howard is an independent institutional stockbroking and investment banking business focused on servicing the needs of our corporate clients and institutional investor base.
The company began trading in 2011 with a team of highly experienced market professionals and the goal of building a leading capital markets business in an entrepreneurial environment.
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