Goodman Fielder (GFF) Update

Submitted by Craig Strzelecki on 6 July, 2007 - 19:33

GFF NZ dairy expansion: GFF has acquired a NZ route trade milk brand ‘Cow and Gate’ and won the contract from IDP to supply Progressive’s (WOW) private label milk. These add c37m litres per annum to GFF’s current c170m litre portfolio. WOW will stock GFF’s Meadowfresh brand as its major branded milk. Goodman Fielder (GFF) has a Neutral 1 shares recommendation and a $2.59 price target from Australian shares analyst UBS. IDP milk presence diminished: This makes the NZ milk industry more rational again with IDP having a non-compete agreement and Fonterra being Goodman Fielder's duopoly competitor. WOW and Fonterra raised retail milk prices c13% last week and we expect GFF to follow imminently. This helps recover 27% raw milk cost increases from October 2007. WOW still a tough customer: The analyst still expects WOW to be a tough customer for GFF as it uses milk pricing to win market share from Foodstuffs and the convenience channel in NZ. However they consider GFF’s expansion a positive development for industry structure at this time. The analysts maintain their Neutral 1 rating and $2.59 price target for Goodman Fielder (GFF) based on DCF. We think the stock is undemanding given 14.6x 08E PE (17% market discount); 9.5x 08E EV/EBITDA; and 5.3% dividend yield. However this reflects low growth prospects, retailer power, private label threats & continuing cost inflation. They await next catalyst being FY 07 results on 28 August. read a previous recommendation for Goodman Fielder.

Goodman Fielder Limited is listed on the Australian Stock Exchange (ASX) under stock code GFF. You can view their investor website here. GFF was listed on the ASX on 19 December, 2005. Max Ould is the chairman for Goodman Fielder and the Managing Director is Peter Margin. Goodman Fielder manufactures and supplies various consumer food products, including baking, spreads & oils, edible fats and dairy goods. The company owns a host of iconic brands that generations of Australians and New Zealanders have grown up with and put in their supermarket trolleys every week.Their brands include Meadow Lea, Praise, White Wings, Pampas, Mighty Soft, Helga's, Wonder White, Vogel's (under licence), Meadow Fresh, and Irvines. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade GFF. Check your charts and good luck with your share trading!

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