Australian investors have an opportunity to take part in the future growth of the food and agriculture industries. Our population may not be as big as some of our Asian neighbours, but we produce and export so much quality food that the products and the companies that make them are in the international investment spotlight.
You should know about these companies and be familiar with their growth potential to meet higher export demand.
Beef and agricultural product provider Australian Agricultural Company Ltd (ASX: AAC) could benefit from negotiations for a new free trade agreement with Japan. It could change tariffs and possibly increase the amount of Aussie beef that is exported to the country.
Japan is Australia’s largest beef and dairy market, but changes may meet opposition. The company is a major beef exporter and the agreement could potentially lower its final overseas prices, making it more price competitive.
In May last year, its share price was down to about $1, yet has rallied since October and now is around $1.20.
Shareholders in Bega Cheese Ltd (ASX: BGA) were saying “cheese” with a big smile from the share price rise of almost 100% in the past 12 months. It may not have taken over Warnambool Cheese & Butter Factory Company (ASX: WCB) in the recent three-way takeover bidding, but the company benefited from the bidding war that pushed up the value of its stake in Warnambool Cheese.
There may be further consolidation in the dairy industry. Asian companies and investors may be looking to invest in Australian food producers and distributors.
Revenue and profits have risen in the past two years since it listed in 2011.
Another good story where investors may know the brand but not the stock is Tassal Group Limited (ASX: TGR), the producer of Atlantic salmon. Earnings have been relatively stable since 2009. The first half of FY2014 saw a 25% increase in operating net profit after tax. Performance ratios like return on equity were up as well.
Its share price climbed high over the past year, from around $2 to $3.85. Its PE ratio is about 15, which is at the top end of its historical average PE range.
We may take a lot of food for granted in our supermarkets, but developing nations all around Asia are looking to source high quality food – meat and dairy being prime examples. Apart from buying the products, they may also become more interested in investing in our food producers. That could mean higher earnings as well as the potential share price gain from takeover bids.
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