Select Harvests is involved in the growing, processing, packaging and sale of almonds and its by-products from company-owned and leased almond orchards and processing, packaging, marketing and distribution of edible nuts, dried fruits, seeds, muesli and a range of natural health foods. The company is Australia’s largest vertically integrated almond company with a portfolio of 9,371 hectares of almond orchards, circa $120 million of permanent water rights and a 40,000MT pa processing facility. Given back-to-back poor harvests in CY22 (quality) and CY23 (quantity), Select Harvests has had to suspend dividends and is approaching its debt ceiling.
The share price fall over the past 28 months, however, presents an excellent opportunity to invest in quality agricultural assets that are now emerging from temporary distress. Our view is that Select Harvests is entering a period similar to 2014-16, initially with the return of volumes in FY24, and growing price tailwinds from FY25. Accordingly, we have initiated coverage with a Buy recommendation and a target price of $5.09, and view current price levels as an opportunity for patient investors.