Here’s why Elders Ltd shares went gangbusters today

Credit: Andrew Stawarz

Considering the broad sell off which has dragged the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) down by over 2%, it is hard to imagine that there could be a company going gangbusters today.

But Elders Ltd (ASX: ELD) certainly has been. Whilst its shares closed the day higher by a solid 5% to $3.68, they were at one stage higher by as much as 7.4% in early trading. An announcement out of the rural services company before the market opened was the reason for today’s gain.

The company advised that it has undertaken a full review of its Live Export business. As a result it has decided to immediately exit the long haul live export business.

Considering this side of the business had been struggling and is expected to make a full year loss in the region of $8 million to $9 million, it isn’t too surprising to see investors react positively to the news.

Its decision to exit the Live Export business will result in restructuring and exit costs totalling approximately $6 million and will be treated as non-underlying in the results for the year ending September 30 2016.

Excluding these costs and the Live Export business loss, management expects full year underlying earnings before interest and tax to come in between the range of $54 million and $57 million. This will be an increase in the region of 10% year on year and paints a positive picture for the rest of the Elders business in my opinion.

With its shares changing hands at around 9x estimated full year earnings, I believe Elders represents an interesting investment option. All in all, it could prove to be a better investment than either Australian Agricultural Company Ltd (ASX: AAC), Graincorp Ltd (ASX: GNC) or Select Harvests Limited (ASX: SHV) for those looking for exposure to the rural sector.

But before investing have you looked to see if you own either of these three wealth destroying shares?

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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