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Viterra Down Nearly 4% as UBS keeps Buy rating, $14 Price Target

UBS has kept a 12-month Buy rating and $14.00 price target on Viterra Inc. (VT.TO), saying its Q1 result was a "solid start" and it expects more of the same in FY11.

PIRSA upgrades crop production estimate for South Australia:

"Following VT's Q1 earnings release, PIRSA released its latest crop production update in which it increased its estimate to 10.3MT from 9.7MT in Jan 2011. It was noted that the bulk of the harvest is now complete and rain damage to the grain was less than initially feared with only a small proportion of grain downgraded to feed. Therefore we now forecast F2011 total receivals of 9MT (from 8.8MT before) for VT Australia F2011. Industry receipts in Western Canada are estimated to be 31MT and global gross margin/tonne of $35 (in line with VT's guidance)."

Favourable mix and supply/demand dynamics in Agri-products:

"Management expects an additional ~2m acres of canola to be seeded in F2011 which bodes favourably for mix and margins in the Agri-products segment - canola typically commands a higher level of crop inputs (~$105/acre) vs. wheat ($83), barley ($68) and pulses ($65). Western Canada fert demand should be supported by robust commodity prices and increased nutrient requirements following excess moisture in 2010. VT continues to expect F2011 fert margins/tonne of $100-$120."

VT keeps powder dry for future acquisitions:

"With net-debt-to-cap of 25%, the balance sheet remains healthy affording VT the flexibility to remain opportunistic with respect to both tuck-in and larger acquisitions in F2011. While asset valuations have moved higher, timing and strategic fit remain key criteria for management."

Valuation: Buy; $14 PT:

"$14 PT is based on 10-yr DCF and assumes WACC of 9% and TGR of 2.5%."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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