Morgans understands the company’s marketing operations have been affected by the anti-dumping investigation into Australian barley exports by China. This has caused feed grain prices to weaken materially. Given the fall, the broker believes the company has had to sell grain at prices below what it purchased.
The broker makes material downgrades to FY19 forecasts and expects a loss to be reported. The issue also raises concerns about the company’s trading and risk management policies. Hold rating maintained. Target is raised to $9.30 from $7.20.
The broker also believes the share price could trade lower if the LTAP offer does not proceed, although the de-merger proposal from Graincorp is a short-term measure that should create value for shareholders.
Sector: Food, Beverage & Tobacco.
Target price is $9.30.Current Price is $9.10. Difference: $0.20 – (brackets indicate current price is over target). If GNC meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges – negative figures indicate an expected loss).
