Is it time for the price of MSF to break out of the holding pattern of the last four months? Volumes have risen strongly, but the price hasn't moved much as the specs have sold their entitlement to the $3.15 SPP in late January. Most of those short term holders should now be out and it's time for a decent run. Closing sales in the match today were strong, bringing the price to finish at $3.55 and over the $3.50 barrier.
World sugar prices have been rising steadily from 5 USc/lb in 2003 to now sit around 30c/lb. Sugar has been one of the fastest rising commodities and the attractiveness of the industry is obvious from the urgency of the big international players taking out the smaller companies.
CSR's large sugar business was bought last year. Last month, global giant Bunge couldn't get its offer for Tully Sugar over the line. Will MSF be next?
World giant Mitr Phol acquired 19.9% of MSF in November after paying $4 a share when the market price was then $2.70. Clearly it thought $4 was a great deal. It recognised MSF's value after MSF acquires the remaining 50% of FNQ sugar mills at prices finalised early last year - before the most recent sharp rise in sugar prices.
If we value MSF at similar values per tonne of cane crush that were paid to CSR or companies taken over in Brazil recently, MSF would be worth $5.00 to $6.00 a share.
With Mitr Phol, Bunge and other global players all looking to expand their interests, we could see an auction for MSF in the next few months. Until then, MSF represents good value with volume about to double upon completion of the JV and their cane fields suffering little damage from Cyclone Yasi.
Time to dip those sticky fingers into the sugar bowl!
MSF Price at posting:
$3.55 Sentiment: Buy Disclosure: Held
