On Monday, the Elders Ltd (ASX: ELD) share price pushed higher after investors responded positively to the agribusiness company's half year results.
The ASX 200 share ended the day over 1% higher at $8.30.
While this is positive, it doesn't change much on a six-week basis, with Elders' shares still down approximately 16% over this period.
Is this recent share price weakness a buying opportunity for investors or should they keep their powder dry? Let's see what analysts at Bell Potter are saying about the company.
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Is this ASX 200 share good value?
According to a note released this morning, the broker was a touch disappointed with Elders' performance during the first half.
Although the broker was expecting a sizeable profit decline, it was still short of expectations. Bell Potter commented:
Operating revenue of $1,365m was down -18% YOY (vs. BPe $1,365m). EBIT of $38.5m was down -54 % YOY (vs. BPe of $44.1m), with a higher-than-expected contribution from retail being offset in large by a weaker Wholesale result. Underlying NPAT of $14.4m was down -71% YOY (vs. BPe of $19.8m) and reflected a materially higher YOY interest charge (reflecting a +$118m YOY uplift in average working capital balances and higher base rates).
This has led to the broker trimming its earnings forecasts for the ASX 200 share for the coming years. It adds:
Our NPAT forecasts are downgraded -5% in FY24e, -3% in FY25e and -3% in FY26e, largely reflecting higher financing and depreciation charges (lease + capex).
Staying buy-rated
However, despite Elders' underperformance, Bell Potter remains very positive on the company and has even increased its valuation for its shares.
According to the note, the broker has retained its buy rating with an improved price target of $9.30 (from $9.10). This implies potential upside of 12% for investors from current levels.
In addition, the broker is forecasting some attractive dividend yields this year and in the future. It has pencilled in yields of 4.3% in FY 2024, then 4.9% in FY 2025, and then 5.2% in FY 2026.
Overall, Bell Potter appears to believe that the ASX 200 share is undervalued based on historical multiples and its through the cycle earnings estimates (which have been boosted following the result). It explains:
We see ELD trading at 7.5-8.0x Through-The-Cycle (TTC) EBITDA, which we have raised to $270-280m reflecting YTD business investment ($68m in 1H24 + $51m on Knight Frank TAS), a discount to its historical average of 8.5x.
