The highlight of the result was the international segment, shown below to be growing quite strongly, thanks to China, where CGC’s locally grown products have enjoyed considerable uptake.

Berries, within the Produce premium segment were also notable, with price increases of 40%.

In general, the business is asset heavy, which tends to depress the highly cyclical returns.

Management has a target of generating 15% returns through the cycle, which seems plausible based on the relatively limited listed history. However, we are far from that aspirational average at the moment, and given energy costs, labour costs, and supply chain costs, we aren’t likely to get there in a hurry.

However, should those costs normalise, the upside is material.

The abovementioned capex means there’s relatively little left over for dividends or a more meaningful de-gearing unless the earnings expand or those COVID/supply chain cost pressures abate.

That said, expansion should come from increased yield/production across the various product lines. For example, Riverland, Sunraysia, and 2PH are forecast to collectively increase citrus volumes by 17% per annum out to 2024.

At a headline level valuation metrics are generally reasonable, having de-rated enormously since listing…

Costa is starting to screen as good value on the Fama French factors…

And has an implied earnings trajectory which looks reasonably achievable.

Overall, a high risk high reward ag play. A little like TGR, we would probably need to see capex intentions moderate before contemplating CGC for the Core Portfolio, but it sits fine in the absolute return portfolio.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

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