Australian Agricultural Company Ltd (ASX: AAC) is the nation's largest farmer of beef.
As the chairman of AAco noted in his address to this year's annual general meeting (AGM):
"Asia's growing middle class is projected to number 3.2 billion by 2030 – and expected to double the region's food consumption by 2050. As a consequence, we are on the cusp of a great opportunity."
As far as an investment thematic goes, Australia's comparative advantage in agricultural production could finally be about to provide the sector as a whole with a demand driven tailwind.
Investors are already seeing the boost in sales which niche providers such as Blackmores Limited (ASX: BKL) and Bellamy's Australia Ltd (ASX: BAL) are enjoying – the share price of these two stocks are up a staggering 370% and 450% respectively in the past 12 months!
AAco is also positioning itself to be a major beneficiary of this forecast increase in demand from Chinese consumers for Australia's agricultural produce, specifically their rising demand for beef.
The group recently completed the $91 million investment in the Livingstone Beef processing facility in Darwin which has transformed the company from a standalone beef producer into a vertically integrated producer and marketer. The pleasing results of this shift can be seen in the 42% year-on-year rise in boxed beef sales to $268 million – boxed beef sales now account for 77% of overall sales revenue.
Why buy?
AAco continues to trade at a slight discount to its stated net tangible asset backing. The commissioning of the processing facility, combined with growing Asian demand has the potential to offer a step-change in earnings for the company. This step-change, combined with the flow-on in the form of a restatement of dividends plus a share price trading near its 52-week low could bode well for a re-rating of the stock over the medium term.
