GrainCorp is a current holding in our ASX100 model portfolio.
We continue to follow the developments regarding the demerger or divestment of the MaltCo entity from the main Graincorp listed business. Either outcome is likely to unlock value for Graincorp shareholders.
GrainCorp’s proposed MaltCo would be the world’s fourth-largest independent maltster with assets in Australia, the United States, Canada and Britain. It made $170 million EBITDA in the 2018 financial year.
We see upside potential for the GNC share price supported by a share buy-back or capital return in early 2020.
GrainCorp is now added to our watch list following the recent Algo Engine buy signal. We see value near $7.50 and look for buying interest to rebuild following the disappointing half year earnings announcement.
GNC reported an underlying net loss after tax of $48 million for the half year. Net profit after tax for the half year last year was $36 million.
GrainCorp Chief Executive Officer Mark Palmquist says these results reflect a particularly challenging period in grains and oilseeds, including severe drought conditions in eastern Australia and grain trade conditions.
They expect continued demand for Malt products in the 2019 northern hemisphere summer but challenging conditions in eastern Australia to continue in the second half.
Planting for the winter grain crop is well underway in eastern Australia, however it is too early in the season to forecast grain production levels and the potential implications for GrainCorp.
We’ll continue to track GNC and update our readers as we see the short-term indicators rebound.
Graincorp is now under Algo Engine buy conditions and buying support has developed around $9.00.
The story gets slightly more complicated for investors, following Graincorp announcing they intend to demerge the global malting business into a separate ASX listing. This is likely to occur in the second half of 2019.
This will then leave the integrated grains & oils business as a separate ASX listed company.
We believe the standalone malt company will be an attractive investment.
Following a number of analysts upgrading the outlook for Graincorp, the stock rallied over 5% in yesterday’s session.
We’ve been tracking this name, waiting for a reversal with increased volume and conviction. With the stock closing yesterday at $8.64, we now consider the $8.16 low as new support and look for a base to build at or near $8.50, with upside potential to $9.00.
Our Algo Engine has been alerting us to the retracement and “higher low” pattern developing in GrainCorp.
The stock price bounced from oversold conditions in Thursday’s trading, after touching $8.51. Friday displayed strong follow through buying with the price action closing near session highs.
We’ve been looking for a move higher in GNC, it looks like it could be underway, and a rally back to $9.25 – $9.50 is our target.
Apply a stop loss below $8.51.
Invocare is another name we’re watching for confirmation on a developing “higher low” pattern. Friday’s closing price was a little weak. We’ll watch this name into next week and keep you updated on our analysis.