July 20, 2015
Volatility and other mitigating factors in the sharemarket are hindering the float of fruit and vegetable grower, Costa Group, indicating that the company will find it unlikely that it will achieve the higher range of its proposed share price.
Group chief executive, Harry Debney, along with company advisers, UBS and Goldman Sachs, are presenting the float to investors in New Zealand one day prior to a share sale to fund managers. A final price is expected to be released shortly after, however it is unlikely that it will reach the top end of the company’s proposed per share price range of $2.20 – $2.70.
The giant horticulture player presented the deal to U.S. and Asian investors as well as local Australian buyers last week receiving positive feedback.
“From a quality perspective, we think it’s a good business,” Platypus Asset Management founder and chief investment officer Donald Williams said. “They have got pretty good infrastructure and they have penetrated a lot of markets. There is a genuine growth story there. It’s not a 20 per cent growth story but you realistically could expect it to produce decent earnings per share growth over a number of years.”
Despite this general outlook, the timing of the float is less than perfect as volatility on global markets has forced multiple other companies to forego their offerings. In addition, some investors are concerned about volatility in Costa’s earnings, as the company’s prospectus indicates that for every 1% in variation in sales, the company can expect a net profit swing of almost 10%.
Costa Group is Australia’s largest top supplier of mushrooms, berries, tomatoes, and citrus fruit with presence in Europe, Asia, and farms in Morocco and China. The group produces the bulk of its produce through a protected cropping model, or under cover from the elements – which should help protect the group from the usual risks associated with traditional agricultural production.
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