Davy Research |
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Total Produce
(TOT ID)
Fresh produce companies fare well in recent analysis
26 April 2012
Aiden O' Donnell
| Closing Price: | 45c | Rating: | Outperform | 14/05/10 | Previous: | Neutral | 30/06/09 |
FACTS: According to Fresh Produce Journal, an analysis by corporate financial analyst Company Watch indicated that produce companies are on a better financial footing than many of their manufacturing counterparts.
ANALYSIS: Company Watch uses its own method to rank companies according to the strength of their financials. It assigns each company a 'H score', with 100 being the best achievable mark. A mark less than 25 implies that the company is in danger of going under.
Of the 11 fresh produce companies analysed, most scored very highly and only one fell into the danger zone — this compared to 25% across the food retail supply chain. In addition, most fresh produce companies in the survey improved their scores year-on-year.
The reason so many fresh produce companies scored well is that most are well funded, generate strong cash-flows and have good liquidity.
DAVY VIEW: Although Total Produce is not referenced in the article, in our view it would also score very highly. Profitability has been solid through the past five years despite an extremely challenging operating environment. Cash-flow and returns are outstanding and the group is very well positioned to lead a consolidation in the European fresh produce sector. It continues to trade on a very undemanding 6x P/E and in our opinion, has upside potential from current levels.