GFF

Goodman Fielder (GFF) has a share price target of $1.85 from sharemarket analyst Macquarie Research Equities.

Goodman Fielder (GFF) Fuel cost pressures likely to hurt

Event: Fuel costs another headwind:

GFF NZ dairy expansion: GFF has acquired a NZ route trade milk brand ‘Cow and Gate’ and won the contract from IDP to supply Progressive’s (WOW) private label milk. These add c37m litres per annum to GFF’s current c170m litre portfolio. WOW will stock GFF’s Meadowfresh brand as its major branded milk. Goodman Fielder (GFF) has a Neutral 1 shares recommendation and a $2.59 price target from Australian shares analyst UBS. IDP milk presence diminished: This makes the NZ milk industry more rational again with IDP having a non-compete agreement and Fonterra being Goodman Fielder's duopoly competitor. WOW and Fonterra raised retail milk prices c13% last week and we expect GFF to follow imminently. This helps recover 27% raw milk cost increases from October 2007. WOW still a tough customer: The analyst still expects WOW to be a tough customer for GFF as it uses milk pricing to win market share from Foodstuffs and the convenience channel in NZ. However they consider GFF’s expansion a positive development for industry structure at this time. The analysts maintain their Neutral 1 rating and $2.59 price target for Goodman Fielder (GFF) based on DCF. We think the stock is undemanding given 14.6x 08E PE (17% market discount); 9.5x 08E EV/EBITDA; and 5.3% dividend yield. However this reflects low growth prospects, retailer power, private label threats & continuing cost inflation. They await next catalyst being FY 07 results on 28 August. read a previous recommendation for Goodman Fielder.

Goodman Fielder (GFF) has a Neutral 1 share trading recommendation and a price target of $2.52 per share from analyst UBS. They have downgraded their rating from Buy 1 to Neutral 1 with their DCF based price target is lowered from $2.65 to $2.52 in line with their earnings downgrade. GFF reported H1 07 EBITDA 6% below our expectations due to challenging conditions in NZ and restructuring costs. Headline NPAT was boosted $29m by a non-operational FX gain. Reassuringly, FY 07 prospectus NPAT was reiterated excl the FX gain & restructuring but this implies faith in a stronger H2 performance. Bolt on acquisition opportunities are gaining momentum & Australian Baking is strong. FY 07 EPS +3.2% flattered by FX gain & lower tax charge; EBIT -8.6%. FY 08-09 EBIT lowered 7-8% but EPS -4% given tax rate of 27% versus our previous 31%. GFF is focused on FY 07 NPAT prospectus of $224m but we remain more cautious at $208m given NZ challenges where new management does not start until April. Australian Baking duopoly, bolt on acquisition pipeline, 13.6x 08 PE and 5.7% dividend yield remain key investment positives. However potential stock overhang (Rank's 20% holding escrowed to Aug 07) could weigh on the share price now and management faces stiffer operational challenges than we anticipated.

Goodman Fielder (GFF) have a maintained Buy 1 share trading recommendation and a raised price target of $2.65 from analyst UBS. The analyst notes that the AC Nielsen grocery update to 31 Dec 06 shows a deceleration in GFF's MAT bread value growth to 5.5% from 7.5% at 01 Oct 06. However the Sept quarter benefited from price increases that have been repeated in Jan 07. The 5.5% trend compares favourably to GFF's prospectus forecast of 3.4% Australian baking sales growth in FY 07. Homebrand in baking does not appear to be a big threat with market share down 260bp from two years ago. GFF is increasing share in the margarine, salad dressing & oils categories. GFF will report H1 07 results on 27 Feb. The analyst looks for FY 07 prospectus NPAT of $224m to be reiterated. A further catalyst for the stock will be the appointment of a new CFO - we believe GFF's increasing profile will ensure a strong candidate is found. Meanwhile potential acquisition opportunities including Australian dairy look exciting. Their DCF-based price target is raised to $2.65 from $2.43 reflecting a predicted beta of 0.75 (previous 1.0) now that GFF has established a trading track record. At $2.65 GFF would still be at a 19% FY 07E PE discount to market with a 4.8% dividend yield.

Macquarie Research Equities have a Quant Model (quantitative alpha model) which "looks at a combination of earnings revisions, composite valuation, price momentum, earnings certainty, consensus recommendation and changes in consensus recommendation." They note the following for this week:

Macquarie Research Equities (MRE) have reiterated their Outperform recommendation for the Goodman Fielder (GFF) stock with a 12 month share price target of $2.29. The broker notes that "GFF offers defensive characteristics in a volatile market – further, on a fundamental basis, the stock still represents value at current levels."

UBS has maintained its position on Goodman Fielder with a Buy 1 recommendation and a target of $2.60 based on DCF. UBS says that Goodman Fielder currently trades at a 12.9x 07E PE and hence a 20% discount to market. Examine your charts.