The Punter is waiting to see if the China Dairy Corporation does something interesting with its mound of cash. He's also giving Beston Global Food Co and Australian Dairy Farms Group another chance.
LOTS of rain, lots of grass, milk production up 29 per cent, and there are forecasts of significantly higher milk prices.
So why are shares in the Australian Dairy Farms Group (ASX code AHF) still only half what they were a year ago? China Dairy Corporation (CDC) is even worse, despite boosting its dividend by 12 per cent, while sitting on more than $20 million in cash.
Its shares are down 60 per cent over the past 12 months, as are those of the Beston Global Food Co (BFC), which gets 84 per cent of its revenue from the dairy sector.
In the hope of making a quicker buck, Punter has bought 25,000 shares in a would-be graphite miner.
The milk price, increasing competition in the infant formula business and the turbulent times at Murray Goulburn and Bellamy’s (BAL) have not helped.
The industry has been churned around and investors are far from sure that it is being turned around.
A grumpy Punter was prepared this week to bank the $64 he has received as a CDC dividend and then dump the shares.
But by traditional measures the shares are cheap – they are selling for less than twice their earnings per share, and even allowing for the fact that there is no franking tax rebate, the dividend yields 2.7 per cent.
So he has decided not to lock in a loss, but to sit and wait and see if the company does something interesting with its mound of cash.
He will also give BFC and AHF another chance – which may just reflect the fact that it is always hard to sell at a loss.
In the hope of making a quicker buck, he has bought 25,000 shares in the would-be graphite miner Lincoln Minerals (LML).
It is sitting on one of the world’s top ten graphite deposits at Kookaburra Gully on the Eyre Peninsula.
The only regulatory barrier still to be overcome is to get an environmental tick of approval from the South Australian government.
That application should be lodged by mid-year and the company expects development to go ahead at the end of this year or early next.
At the end of March it only had enough cash to carry on for maybe six months, so hopefully there will be a fundraising offer at a good price before long.
• The Punter has no financial qualifications and no links to the financial services industry.
AHF Price at posting:
10.5¢ Sentiment: Hold Disclosure: Held
