The normally restrained International Nut Congress was recently held in Melbourne and the mood was ecstatic – phrases such as "a tidal wave of demand is coming" were spilling from many a global nut expert.
However a sober note was introduced when Australian Nut Council chairman Mr Sampson-Genest said nuts were a long-term investment and Australians were not good at long-term investing. Some of his comments were: "you'd think it would be the perfect model for a superannuation investment"; "the returns are certainly there, over a 15 or 20-year lifespan you're looking to get a really positive investment"; "but in our investment community — two, three or five years is a long-term investment — and that's not the way the nut industry works"; and finally "there's a change of mindset that is required."
Sadly he's right – many Australian investors have trouble looking around the next corner and are heavily reliant on confirmation bias before coming to decisions. Luckily there are a couple of ASX-listed companies who have already done the hard work for us and investors can now hop on board for the payoff.
Select Harvests Limited (ASX: SHV)
This company is Australia's second-largest almond grower and the largest domestic nut and health food business. Wet weather has affected the harvesting of this year's crop production and the effect on yields remains uncertain. However 73% of the orchards are now reaching maturity and an accelerated lift in production is expected from 2015.
Growth opportunities for Select Harvests include further orchard acquisitions; expanding and exporting their existing range of consumer brands; further developing the health food business and increasing productivity by improved husbandry and the use of bio stimulants. Not to mention employing more bees!
Although it has a disappointing history (last year's $26m writedown of biological assets cleared the fog) Select Harvests is now well placed to benefit from the forecast 8%pa growth in global almond demand over the medium term. A definite caution with Select Harvests is the relatively high level of gearing.
Webster Limited (ASX: WBA)
This company has two major operating divisions.
Walnuts Australia
- Largest vertically integrated walnut business in the southern hemisphere.
- As existing orchards mature production can be expected to double over the next five years.
- Exports account for a major portion of production, with strong demand continuing from Europe, China and Asia.
- Ongoing program of new plantings and the development of new orchards / contracts will drive further growth.
- The recognition of walnuts as a major health food will benefit producers.
Field Fresh Tasmania
- Australia's largest onion exporter supplying East Asia, Europe and China.
- Tasmania is one of the best locales for growing high quality and long lasting onions.
- Onions are grown under contract with an emphasis on good relationships.
- Capital investment in improved processing and packaging facilities has helped productivity.
- Contract has been signed with a major supermarket group in a deepening development of the domestic market.
Looking to FY2015 Webster Limited sells at 13 times projected earnings and a fully franked yield of 4.2%. Having used the sale of its Tassal Group shares to pay off debt, Webster has a strong balance sheet and a good growth curve – in my view this company offers great value at the current price of 92c.
