Growth Focus: Webster Ltd (WBA)

by Patrick Taylor




Date of Data Capture: 28/7/2016

Name: WEBSTER LIMITED (WBA)

Classification: Food & Farming

Current Price: $1.30

Market Capitalisation: $461M

Forecast EBITDA Growth: 79.3%

Gross Yield: 0.9%

Consensus Price Target: $1.47*

# Covering Analysts: 2 (*thin coverage)

Discount at Current Price: 13%

Price Target Trend: Flat

Signal Time Frame: Quarterly-Monthly

Trend Bias: Up Medium-Short

Indicators:
Short-term: Neutral Negative
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: Buy

Set up Notes:
• WBA recently broke above resistance and out of a major consolidation, while a retest is that zone is likely the bigger picture is very positive.
• Once past the resistance cluster between $1.20 and $1.25 the stock shot up and has skated up along short-term dynamic support since – there could be a great buying opportunity on a bounce off those same levels.
• That said the fundamentals are excellent and there is a lot of momentum building behind this one in a sector having some remarkable successes lately.

Growth Focus: WEBSTER LIMITED (WBA)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

Australia’s 4th oldest company, Webster Ltd (WBA) is also Australia’s largest onion and walnut grower and exporter. Originally founded in Tasmania they are now based in NSW with agricultural and horticultural investments spreading across QLA, NSW and Tasmania. This is an exciting agribusiness company with high barriers to entry, good water supply and a favourable production profile - finding value at these levels was an easy nut to crack.

While they currently pay a small (but increasing) dividend the real reason to Buy Webster is capital growth and with strong sales, increasing margins and profitability being predicted to continue strongly, this company offers value like low-hanging fruit. Their investments in water supply de-risk the walnut orchards, which are their most lucrative production line, while also offering favourable opportunities to benefit from surplus. With water supply becoming progressively more important, the old line of ‘following the money flow’ is becoming more synonymous with just ‘following the water flow’ – and they have excellent liquidity there.

The price history is typical for a successful growth stock that topples over under the weight of their own success. With a rally that began late in 2011 around 30c, they rose up almost 700% to hit a peak of $2.00 by mid-2015, at which point they entered into a secular consolidation that brutalised them over 12 months to see them hit a low of around $1.10. Since then we have seen them grinding sideways and higher as they work through resistance layers, culminating with a break through their major resistance cluster priced between $1.20 and $1.25 just two weeks ago and we expect them to branch out further from here.

Fairly typically, the resistance break saw them pop to the upside and while we should expect a dip to retest those old levels for support in the short-term there is enough here to get us invested. They are showing good and positive signalling with excellent momentum building up nicely in the longer-term frames while they do show a bit of weakness in the very short-term which leaves us expecting a retest before too long. A bounce off the support-cluster at $1.20 - $1.25 should represent a very good buying opportunity waiting to be unearthed.

If this nascent long-term uptrend unwinds according to potential we should expect a bump at old structural resistance targets around $1.40, $1.60 and $2.00 should it go that far. The good news with these resistance targets is that they tend to attract price trends – even if they sometimes caused them to falter – and accordingly could represent profit points. This will of course be dependent on price action at the time and whether the resultant uptrend is fully ripened and ready to harvest.

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of RM Capital Pty Ltd (Licence no. 221938). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.