The Select Harvests Limited (ASX: SHV) share price has grown by 12% since 9th October 2017 when management announced that they had rejected an advance from Mubadala Investment Company PJSC and also announced a capital raising.
Capital raising
The Select Harvests share price is currently $4.70, whereas the capital raising price is set at $4.20, representing a 12% discount.
The offer looks like good value if the share price stays around this level. However, a lot of shareholders may all have the same idea of trying to make a quick sale, which could see the price plummet after the new shares start trading on the market.
Is Select Harvests a buy?
For investors who aren't currently shareholders I think the business could be an interesting long-term investment.
Almond consumption is rising around the world with products like almond milk, baked almond goods and also just regular almond consumption in plain nut form.
A commodity producer will always be governed by the supply and demand cycle. Demand for almonds may be rising but supply can grow even quicker, particularly from California's almond region.
Select Harvests has seen its profit and share price heavily punished over the past couple of years due to company-specific reasons as well as the almond price per kilo falling to AU$7.43 during FY17.
If the almond price recovers somewhat and the total crop does increase by roughly 50% over the next few years, then Select Harvests could turn into a clever turnaround play.
Foolish takeaway
Select Harvests is currently trading at 21x FY19's estimated earnings. If the almond price recovers over the next few months then today's price could end being quite cheap.
