Analytica takeover proves a fruitful decision for HRL

Analytica takeover proves a fruitful decision for HRL

Business
The Australian Dairy Nutritionals Group will start manufacturing infant formula by the middle of 2020, having bought the machinery secondhand for $5m.

The Australian Dairy Nutritionals Group will start manufacturing infant formula by the middle of 2020, having bought the machinery secondhand for $5m.

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Despite the costs associated with the takeover, HRL had more than $4m in the bank at the end of the last financial year.

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Three aphorisms really sum up investing in the stock market. Fools rush in where angels fear to tread. Fortune favours the bold.

In hindsight, the bold thing to have done was to buy back into HRL Holdings (ASX code HRL) about a month ago when they dipped below 8c. After all, a couple of the directors had topped up their own shares in December at around 12c.

The Punter hesitated last week because there were more sellers than buyers at the going price, but those sales have been absorbed and the price has edged higher. He has bought 20,000 HRL at 0.098.

He likes a number of things about the company. While the statutory bottom line was a whopping $4.2m loss in the six months to the end of December, this largely reflects having to write off $4.5m in costs associated with the takeover of Analytica, in November 2017. Some $2.5m of that is an additional payment to Analytica's former owners, because the company has done better than expected.

Underlying gross earnings for the half year were a positive $711,000. The biggest trading division, which covers food and environmental testing, increased sales by 26 per cent. It has a 26 per cent stake in CAIQTest in NZ, which has full Chinese accreditation for pre-export testing. In October, it announced it was setting up a joint venture with MilkTestNZ to test non-liquid dairy products. Despite the costs associated with the takeover, HRL had more than $4m in the bank at the end of the last financial year.

The Sea Farms prawn producers (SFG) have raised $20m through an oversubscribed placement, and are offering ordinary shareholders a chance to buy at the same price, 9c a share, or 11 per cent below the recent average market price. As usual, the Punter will wait until the last minute before deciding whether or not to take up the offer.

  • 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.
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