Why National Australia Bank Ltd is a major shareholder of Costa Group Holdings Ltd

Credit: Didriks

There are few votes of confidence bigger than one of the country’s largest asset managers owning shares in a company.

National Australia Bank Ltd (ASX: NAB) owns one of the country’s largest pension funds called MLC. It has a lot of capital to invest and chose Costa Group Holdings Ltd (ASX: CGC) as one of its investments.

Costa is one of Australia’s largest fresh food producers with some of its main food categories being mushrooms, berries and citrus fruit. Avocadoes became another major category after Costa purchased Avocado Ridge and Lankester. The company now has around 500 hectares of avocado plantings. It has an aim of becoming the number one market player in the avocado sector in Australia.

Costa has big growth plans with aims to double the capacity of its South Australian mushroom farm and to continue to expand in Morocco and China.

In China the company had planted 50 hectares between its two farms at Bailing and Manlai. The two farms are growing blueberries, raspberries and blackberries. A further 58 hectares is being planted in this financial year at a cost of around $20 million. Costa has also secured a further 100 hectares to grow over the next 18 months at the Manlai site.

In FY17 Costa more than doubled its statutory net profit after tax (NPAT). It grew its revenue to $909.1 million in FY17, which was a 10.7% increase compared to FY16. The company expects net profit after tax before self-generating and re-generating assets to show growth of 20% in FY18.

Foolish takeaway

Costa is one of the best-looking food shares on the ASX in my opinion. The company could generate a lot of growth through farm expansions as well as increased earnings from the increased cost of its produce as the human population increases and demand for food increases.

Costa is trading quite expensively at 33x FY17’s earnings. I haven’t bought any shares yet because of the high valuation, if the price/earnings ratio dropped below 30 then I might be more interested.

Until Costa becomes cheaper I’m going to try to buy these hot stocks at good prices.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!