ASX:ELD
Elders Ltd
Investment Summary
The fund managers believe that Elders Ltd's recent 10% share price drop is due to a diminished FY24 earnings outlook stemming from poor sales in the September quarter. They initiated their position last October, recognizing that the Bureau of Meteorology's misprediction of an El Nino spring resulted in shares trading at a material discount to intrinsic value. This prediction was later reversed, leading to a re-rating of Elders back towards its typical mid-cycle valuation range. In their opinion, the recent downgrade reflects atypical demand influenced by prior incorrect guidance from the BOM. Therefore, they anticipate the share price will rebound above $10 as sales normalize. They emphasize that Elders, often referred to as the 'Bunnings of the Bush', is a quality business with a dominant position in rural Australia, strong vertical integration, and top-tier management.
Commentary From The Managers
Blackwattle Investment Partners
30 Apr 2024
$8.36
- Blackwattle Investment Partners continues to hold their position in Elders Ltd despite a recent 10% share price drop due to lowered FY24 earnings expectations.
- The initial investment was made in October last year when the Bureau of Meteorology's incorrect El Nino prediction led to a significant discount to intrinsic value.
- The BOM's subsequent reversal of its prediction acted as a catalyst for Elders' share price re-rating towards its typical midcycle valuation range.
- The recent earnings downgrade is attributed to lost sales from September, where farmers reacted to the BOM's incorrect guidance.
- Blackwattle expects the Elders share price to recover and track back towards its mid-cycle value, projected to be above $10.
- Elders is characterized as the 'Bunnings of the Bush', benefiting from its dominance in rural Australia and effective vertical integration strategies.
- The company is supported by top-tier management, enhancing its long-term growth prospects.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.