Brokering firm First NZ Capital began coverage of Seeka, New Zealand's top grower of kiwifruit, with a ‘neutral’ recommendation, as a positive earnings outlook offsets key risks including the company’s high debt, horticultural factors such as weather, pests and disease as well as performance by the nation's sole kiwifruit exporter Zespri Group and access to key export markets.
The stock fell 2.3 percent to $6.50 in Friday morning trading, cutting its gain for the past year to 32 percent. First NZ research analysts Jack Crowley and Greg Main put a 12-month target price of $7.25 on the Te Puke-based company.
The analysts pointed to Zespri’s plans to double production over the next decade by rolling out additional licences to grow its gold kiwifruit varieties. “As a toll processor, Seeka's post-harvest business, which accounts for about two-thirds of earnings before interest, taxes, depreciation and amortisation, stands to be a beneficiary,” Crowley and Main wrote.
While, according to pro.newsroom.co.nz, the analysts are upbeat about the outlook for kiwifruit volume, they said the outlook for returns is less certain given the combination of demand growth in an underdeveloped fruit category particularly in Asia, Zespri’s growth ambitions, and intensifying international competition from other gold varieties.
