Update/FRM

The 20K portfolio is currently fully allocated. It is possible I will transfer funds between companies, but until any significant rerates occur I don’t anticipate making any changes. This doesn’t mean I’ve just been twiddling my thumbs though. I have still been doing research in the background, so I thought I would use this as a forum to provide some thoughts on other companies I own or am considering.

 

As I think I mentioned right at the beginning of this blog – I am a long term investor. Short term positions are not my strong suit. However, I attempted to use fundamental analysis to choose the companies most likely to appreciate in the short term. Some of these have gone well, while others have hit some bumps along the way. I still hold these because I have confidence in their long term potential. That means I can easily see the timeframe of this challenge rolling over to be more indefinite. I will still attempt to actively manage the portfolio to ensure the funds are put to use as best they can be. That way companies like PRO will have the time to reach it’s potential.

 

Anyway, back to the companies.

 

Farm Pride Foods (ASX:FRM) is a company I have held for a few months. This perfectly demonstrates my inability to time the market as it swiftly proceeded to correct. It did allow me to average down and I am now fully loaded. The current SP is $1.75 and I've now added it to this portfolio. The company sells eggs and egg related products. This is very boring. However, they are exposed to the market-shift to free-range products and they are continuing to increase their exposure by building new facilities. They have recently paid off essentially all of their debt and are making lots of cash.

 

Financial Highlights for FY16:

Revenue - $93.6m (up 3%)

NPAT - $8.2m (up 58%)

OCF - $13.7m (up 49%) (25cps)

EPS - 14.7cps

 

Trailing PE – 12

Price/OCF – 7

 

Catalysts for FY17

·         New free-range facilities coming online, will increase revenue by 15% once operational – NPAT by more

·         Cash building up in bank – possible dividend or acquisition

·         Growing population, growing egg consumption, market-shift towards free-range

·         Valuation is very reasonable – multiple expansion likely

 

Today marks the day of the AGM. There will hopefully be a good update on operations. I decided to put my thoughts on the line and post this before the AGM. I will update anything following the AGM if required…

PS - full disclosure - I have read a broker report on FRM in the past, but I wrote the above based on my own thoughts using only the FY16 report