With the recent rally in Graincorp, we are now seeing better value in the agricultural sector. Both Elders and the FOOD ETF are currently looking undervalued in the sector and we see an opportunity to switch while Graincorp is elevated
In the long run, we intend to switch to hold FOOD ETF, however, given the recent optimism from Graincorp CEO, Robert Spurway, we see a short-term opportunity in the form of an earnings catalyst in Elders on the 26th of May.
If this short-term opportunity does not suit your risk profile, we recommend skipping Elders, and switching straight into the FOOD ETF
Trade: SELL Graincorp above $7.60
Short term: BUY Elders <$6.60, looking for a positive earnings catalyst on the 26th of May. We are not looking to hold Elders long-term, so we would look to take profit or sell on a stop-loss on the day of earnings
Short Term Trade:
Why Switch to Elders short term?
Elders is trading at a significantly lower forward P/E of 12.1x versus GrainCorp’s 18.8x, despite stronger growth forecasts.
Analyst consensus targets imply a 34.5% upside for Elders compared to 13.6% for GrainCorp. Elders is rated a Buy/Add by several brokers (Bell Potter, Citi, Morgans), with targets consistently above $9.00 and up to $9.75, reflecting strong confidence in its recovery and growth trajectory. GrainCorp’s broker sentiment is more cautious, with most brokers at Hold or trimming targets following weaker guidance and persistent margin pressures
Elders is forecast to deliver 14.2% revenue growth in FY25, outpacing GrainCorp’s 9.4%.
EPS for Elders is expected to rebound sharply in FY25 (+100%) and continue growing in FY26 (+21.2%), while GrainCorp’s EPS growth is more modest (FY25: +37.5%; FY26: +6.8%).
Elders’ recent acquisition of Delta Agribusiness is projected to be EPS accretive, with synergies expected to further boost earnings in coming years.
Comparative Analysis: Elders vs. GrainCorp
LONG TERM SWITCH
Global Agriculture Companies Currency Hedged ETF FOOD:ASX
Big picture: The agriculture and trading sector is navigating a mixed cycle, however the top 5 holdings in this ETF (40%) are all very solid, diversified and undervalued. FOOD ETF’s top holding, Marubeni Corp stands out with upside potential (Fair Value Upside: 25.9%), while most North American players face pressure from earnings declines and modest growth.
Disclaimer: The recommendation given is general advice only. It does not take into account your personal objectives, financial situation, or specific needs. This information should not be your sole resource when making such decisions. We strongly recommend you to seek the advice of financial, taxation, and legal professionals before finalising any investment decisions.
Past performance is not an indicator of future returns