Costa Group has significantly increased its exposure to Australian citrus with the acquisition of 2PH, taking total citrus hectares to 4,500 from about 2,900. Credit Suisse believes it is an excellent strategic asset bought at fair value.
It is a high-quality citrus business, generating a revenue/tonne nearly double of that of Costa Group and achieving a 39% earnings (EBITDA-S) margin, explains the broker. The Outperform rating and $4.15 target are unchanged.
Sector: Food, Beverage & Tobacco.
Target price is $4.15.Current Price is $3.40. Difference: $0.75 – (brackets indicate current price is over target). If CGC meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges – negative figures indicate an expected loss).
