The Costa Group has made its debut on the ASX, and the share price took a 3.3% dive from $2.25 to $2.16 in the opening minutes of trade, shortly after midday, before recovering to 1.9% less at 12:20pm to sit at $2.21 per share. The highest shares reached was $2.26
The float has been accompanied by more talk of the 50/50 partnership with US berry producer, Driscoll’s, that the company has within Australia. The international roadshow conducted ahead of the float has peaked interest from overseas investors according to media reports, as Costa establishes its dominance over market share in the berry category.
One of the interesting aspects for investors is the 49% equity stake Costa holds in a Moroccan joint venture with African Blue, which is intended to secure supply of blueberries to Europe and compete with Spanish producers. There are four parties to the Joint Venture, and blueberries can be sold worldwide under the agreement.
Costa CEO Frank Debney and General Manager for the Berry Category, Peter McPherson have spoken of the growth expected, but Fresh Plaza was told that no further comment will be issued until after the initial float has been conducted by a member of the Corporate Affairs team.
Blueberries, the world’s fastest growing crop, have become somewhat of a focus for investors, as Costa has a memorandum of understanding to develop a Chinese berry farm with Driscoll’s.
Some crop varieties are also held under license by Costa, meaning royalties flow from farms planted outside Morocco or Australia. At the end of the 2015 financial year, an additional 24 hectares will be planted, according to the prospectus document issued for the IPO. By 2017 a further 90 hectares will be added.
Analysts have told the ABC that offshore investors have an eye on the company’s future in exports, a key area for growth. Trading on the ASX commenced on a conditional and deferred settlement basis today, with trading on a normal settlement basis expected to commence on August 3.
Strawberries, raspberries and mushroom are all attractive prospects for growth besides a 45% stake in year-round blueberry supply. Strawberry production in particular increased in the 2014 financial year, and revenue was up 106% according to the prospectus issued for the IPO. Costa has 91% market share in raspberries following the Driscoll’s partnership, and 77% in blueberries. Citrus, mushrooms and tomatoes are other key product categories for investors. The company also has a joint venture with Polar Fresh, and alliances with Monterey Mushrooms and Sun World.
Costa has forecast an EBITDA of AUD$70.6 million for the 2015 financial year, and estimates a rise to AUD$90.4 million in 2016
The Costa IPO prospectus can be viewed here.
