Peter Kennan presented his in-depth investment thesis on Wellard (ASX: WLD) at Asian Investing Summit 2017.
Wellard is the global #1 live cattle exporter. Wellard has 22% market share in the export of live cattle from Australia and 25+% market share in the key customer markets of Vietnam and Indonesia. The group also exports cattle from South America into Europe and the Middle East. The company owns the world’s largest fleet of modern, purpose-built livestock carriers. The company was floated on the ASX in December 2015 at A$1.39 per share. Black Crane has acquired an initial stake in the company for A$0.21 per share. The dramatic decline in the share price was caused by a significant contraction of margins as a result of unprecedented high cattle prices in Australia. These prices have been driven up by extreme climate conditions in Northern Australia; several years of draught followed by abnormally wet and long wet-seasons led to very strong demand for cattle by producers (to re-build their herds, known as re-stocking) who in normal conditions would be selling surplus cattle. FY2016 was also marred by crankshaft failures on two sister vessels in the fleet. As a result of these factors the company’s estimated FY2017 EBITDA is only 25% of the prospectus forecast for 2016 and 36% of that achieved in 2015. Peter’s investment thesis is that typical seasonal conditions will resume and cattle prices will return to normal levels post the end of the current re-stocking cycle. The crankshaft failures are also one-off events. Hence, Peter sees no reason why the company cannot achieve EBITDA in line with its prospectus forecast.
About the instructor:
Peter is Managing Partner and Chief Investment Officer of Black Crane Capital. He has more than fifteen years of corporate finance experience across a diverse range of sectors and transactions with UBS Asia and Australia. With UBS, Peter was formerly the Head of Asian Industrials Group for UBS Asia, a corporate finance sector team covering energy, infrastructure, resources, consumer/retail and general industrial companies. He achieved number one team rating in Asia with revenues of US$400 million in 2007, grown from just US$20 million over a four year period. Peter was also the Head of Telecoms and Media sector team for UBS Australia specializing in M&A, advising on many large, complex transactions. Prior to UBS, Peter spent seven years with BP in a variety of engineering and commercial roles. Peter is a frequent ValueConferences instructor.
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