Smashed Avocado and Costa Group

Smashed Avocado on toast is pretty good and so is smashed Costa Group

Costa Group (CGC) is Australia’s largest grower, packer and marketer of fresh fruit and veggies. Most of us would eat something that they have handled each and every day. This is not some fly by night company either with its origins dating back to the early 1900s. Costa Group knows fruit and veg like no other.

Costa Group

Costa Group shares have been flogged over the past 12 months with the stock down around 54%.

These are the major reasons why

  • adverse conditions during the Moroccan blueberry season
  • lower than expected mushroom demand
  • raspberry quality not up to scratch
  • high cost of water for their citrus operation plus a fruit fly problem at their Impi farm

Even with all of the negatives hitting the business it still managed to pump out a half yearly profit of around $40mil.

What about the future?

CGC has said the citrus season is shaping up to be a good one. Berries, tomatoes and avocados are also trading very favourably at present. So yes, there is a mixed bag of fortunes for the group at the moment which is why there is an opportunity to buy the stock on the cheap. If all divisions were firing then CGC would be back above $7.00. The stock currently trades on a modest FY20 PE of 14 times.

Here is the mix; the company is nicely diversified amongst different categories and regions.

Produce revenue split

There is a big push on the population eating healthier so we know demand for fruit/veg is only going to go one way – and that is UP.

A healthy choice for your portfolio; BUY last sale $3.28

 

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