From Globe & Mail this AM Still a lot of upside on this stock.
GLTA
SM
Pointing to a “favourable” outlook for agriculture and seeing “attractive long-term growth potential,” TD Securities analyst Michael Tupholme initiated coverage of Ag Growth International Inc. (AFN-T) with a “buy” recommendation on Wednesday.
“Current global agriculture fundamentals are positive and supportive of AGI’s near- to medium-term outlook, in our view,” he said. “Relatively tight global crop stocks-to-use ratios and historically elevated crop prices are likely to support strong agricultural production volumes (key demand driver for AGI’s equipment and solutions) over the foreseeable future. Meanwhile, we are also constructive on the broader agriculture sector’s long-term outlook (supported by factors such as population and income growth, and the need to upgrade arguably inadequate agriculture infrastructure in many major crop-producing regions).”
“We are attracted to the company-specific revenue growth and margin improvement opportunities that AGI offers. We believe that AGI is well-positioned to realize market-share gains, particularly in a variety of international regions where AGI has more recently focused its expansion efforts. We also see strong multi-year growth potential for AGI’s higher-margin Food platform and Digital segment. Meanwhile, a stated focus by management on integration and optimization initiatives is also likely to support improved margins, in our view.”
Mr. Tupholme called the Winnipeg-based company “unique,” given it is one of few Canadian public companies providing investor exposure to the agricultural sector.
“AGI has over time evolved from an agriculture equipment supplier primarily focused on the North American grain market to a global infrastructure partner in each of the company’s five focus platforms (grain, fertilizer, seed, feed, and food), which has brought with it diversification benefits and considerably expanded AGI’s opportunity set and potential,” he noted.
Seeing its valuation as “attractive,” he set a target of $49 per share. The current average is $52.50.
“AGI is trading at 7.2 times our 12-month forward adjusted EBITDA estimate, near the lower end of the stock’s 10-year historical EV/FTM [forward 12-month] EBITDA valuation range of 6.9–11.5 times,” the analyst said.