IT’S taken the best part of three years but Great Southern Plantations co founder John Young can finally think about Helen Sewell – and smile.
In 2000, Dr Sewell sold most of her shares in Great Southern and walked away with about $40 million in her purse, leaving Young with the job of turning around the former high-flying timber investment company.
A quick glance at the latest Great Southern profit result shows he has achieved that assignment, and done a lot more – such as turn himself into a $100 million man.
When Briefcase caught up with Mr Young he was on his way to Paris for a well-earned holiday.
But, as he flew out the door he had time to reveal that while others had been sellers of Great Southern shares during the great plantation stock investment melt-down between 2000 and 2002, he was buying.
From an initial interest of 35 million shares, John now has 55 million which, at around $1.90 are worth $104.5 million.
Since Dr Sewell sold at an average price of between $1.40 and $1.60, Great Southern has been on a roller-coaster ride.
From mid-2001 to a few months ago it struggled to get above 60 cents as investors fled from a sector beset by a series of shattering blows including adverse tax rulings against some investment scheme operators, the failure of highly-promoted Australian Plantation Timber and the introduction of GST, which saw accountants switch from investment planning advice to selling GST advice.
“There’s no doubt that we were sin-binned along with everyone else in the industry,” Mr Young said as he headed for Perth airport.
“All we could do was keep our head down and manage our way through the issues. Which we have done.”
He’s right. Great Southern’s profit of $41.4 million for the year to June 30 has reverberated through the investment world like a trumpet call.
The stock has soared from a 52-week low of 55 cents to $1.90, and looks like going higher because even at its new price it is still selling on a price/earnings multiple of less than 10-times.
A similar pattern of recovery can be seen across the plantation sector as investors stampede to find the next hot thing – and invariably overdo it in their enthusiasm. Timbercorp, which has added citrus to its olives, almonds and tree crops, is up from a 52-week low of 47.5 cents to $1.56.
Willmott Forests is up from 47 cents to $1.60, and the revived Australian Plantations is up from 8 cents to 36 cents after peaking in early August at 51 cents.
“I always had confidence that we would rebound,” Mr Young said.
“I took up rights in share issues as they were made and bought more shares.”
As well as displaying admirable faith in his own company, Young can look forward to a few interesting milestones ahead as he swans around the Louvre and the fleshpots of Paris.
Perhaps a useful target would be to get Great Southern back up to its all-time high share price of $4.90, at which time (for anyone without a calculator) he will be worth a frightfully cool $269.5 million.
AS for Dr Sewell, well not much to say really.
Retirement was the objective when she cashed out but the word reaching Briefcase is that she is applying her skills as a micro-biologist in the world of fine wool farming, an industry also in recovery though not one likely to put her back in the $100 million league.
Smile on John Young!
RECOVERY in another agricultural sector also seems to be taking hold.
Wine producers, after a dreadful 12-months highlighted by the spectacular fall from grace of one-time market leader, Southcorp, are looking strong on the market.
Local listed leader, Evans & Tate, has been trading at 52-week highs of around $1.35, close to double the 78 cent low the stock slumped to in June.
Most other wine stocks are also off their lows as investors sniff a revival and place their bets on better earnings in the year ahead.
Peter Lehmann is up from $2.81 to $3.82, on its way back to the 52-week high of $4.11. McGuigan Simeon Wines has risen from $3.69 to $4.57, Cockatoo Ridge is up from 47 cents to 70 cents, just short of its high of 75 cents.
Even Southcorp looks like a recovery situation, trading at $3.19 compared with a low of $2.63.
What’s driving the sector?
Recovery is certainly one factor as consumers drink their way through the world’s wine lake that flooded markets from California to Canberra. There might even be some truth in the speculation that the pursuit of a healthier life could be adding to red-wine demand.
Consolidation, and speculation of more takeover activity, is a third – and more likely – factor at work in an industry where Australia retains its natural advantages.
IVERNIA West is not a stock at “front-of-mind” for Australian investors, which is interesting because it appears to be a company with only one asset, and that is a lead deposit 30 kilometre west of Wiluna.
The problem for locals is that Ivernia West is listed only on the Toronto Stock Exchange (code IVW) and doesn’t appear to have a WA office.
It has, however, been singing the praises of the Magellan lead project to anyone who will listen in Canada.
According to its most recent report, Ivernia West is moving swiftly to develop Magellan at a cost of US$26 million for the annual production of 55,000 tonnes of lead a year at a cost which should yield handsome profits – or so they say.
Investors in far away Canada seem to be treating Ivernia West, which started life as an Irish zinc miner, with the same level of caution that Australian investors treat our local boys who go to Botswana or Uzbekistan – out of sight, out of mind and out of the investment portfolio.
Whatever the geology, which looks attractive, there is a yawning gap between what the company says Magellan is worth, a claimed pre-tax value of $US31.6 million, and what you can buy the entire company for – $C7.9 million (or about $US5 million) at the most recent price of C5.5 cents.
Briefcase does not give investment advice –- not for fear of being wrong, but in complete confidence of being wrong. However, there may be an interesting situation in Ivernia West.
Either there is a stock waiting for its story to be discovered (and believed), in which case it will rise sharply.
Or, there is a company with something heavy in its saddlebags – lead, perhaps?
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