IT MAY still be the nation’s biggest cattle exporter, but it has enormous debts, its losses more than tripled in the year ended in June, and it has several times breached its banking covenants.
So why would anyone buy shares in Wellard (ASX code WLD)?
The Punter has bought shares in WLD before, and always regretted it. This week, taking a deep breath, he has done it again, buying 10,000 shares for a total cost of $1120.
He hopes he hasn’t just bought more regrets, but he has noted that even in the current shaky stock market, there are now substantially more buyers than sellers of the shares around the current price.
A big part of Wellard’s problems has been the high price of cattle in Australia, especially for lighter steers that go to Indonesia, which is the company’s largest market. The number of cattle Wellard shipped around the world last year was down 29 per cent.
However, the company does seem to be taking firm action to meet the challenge: It has sold one ship, delayed the delivery of another, is seeking to expand into new markets, including China, and has chartered out vessels when surplus to requirements. It has managed to cut its net debt by nearly $24 million.
The Punter has bought shares in WLD before, and always regretted it.
The company says things have improved somewhat since the end of June, but it “remains unclear” what impact that will have on results for the current year as a whole.
In July, the Holmes a Court’s Heytesbury group increased its stake in Wellard to 11.4pc, paying arbout 12 cents a share, which has to be a vote of confidence.
Australian Dairy Farms (AHF) has also had a substantial vote of confidence in the form of $5m from a private investor, Paul Morrell, who has been happy to pay 13.5c, which is a cent above the market price.
Morrell, who will be invited to join the AHF board, has taken a hard look at the company and its recent strategic overview, and liked what he saw.
AHF says the money will “significantly strengthen the group” in prospective negotiations with value-adding businesses.
The Punter, who is showing a hefty loss on his AHF shares, certainly hopes so.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.