Thursday, June 9, 2011

Share Price Alert: Goodman Fielder Ltd 3

Goodman Fielder Ltd [GFF.NZX]is not one of my better investments. It has returned roughly zilch in the 5 years I have held it.

Never mind, this piece isn't about my poor investment choices but about timing your purchase at the right price.

An opportunity to buy has arisen again since a profit warning in April and a prior share price alert for this stock at $1.44. The share price has retreated since then by 18c or just below 15% to close at $1.26 yesterday. This is the 52 week low. A high of 2 bucks back in November 2010 shows how much value the company has lost in just 9 months.

The share price was last at these levels back in March 2009.

Profit has been impaired by higher commodity prices and unfavourable exchange rates - a common theme for this company for the last few years - and management have seen fit to move prices for their brands higher to recover those increased costs but too late to recover for the full year outlook.

The appointment of a new CEO on June 1 with a very generous and restrictive remuneration package and a lacklustre business history hasn't helped either.

Consumer pressure on price is going to make it hard going for the company to recover these costs as long as the current recession bites and consumers are tending to settle for non brand goods instead of buying some of the pricier brands that GFF offers.

All is not lost though, these Goodman brands are some of the best in the business, are staples on the family table and will continue to be sold and increase in sales when the economy returns to some sort of "normality".

The current share price returns a gross dividend of slightly over 11%, which is clearly a very attractive income given term investment rates of less than half this.

I am picking more softness in this share though and if you have been looking to buy this stock anyway patience is going to get it into your portfolio for less than the current share price.

Share Price Alert Series

Hallenstein Glasson Holdings Ltd
Telecom New Zealand Ltd 4
Telecom New Zealand Ltd 3
Port of Tauranga Ltd
Freightways Ltd 3
Goodman Fielder Ltd 2
Freightways Ltd 2
Telecom New Zealand Ltd 2
Ryman Healthcare Ltd
Charlies Group Ltd
Fletcher Building Ltd 2
Contact Energy Ltd
Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
The Warehouse Group Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd 2
Fletcher Building Ltd
Restaurant Brands Ltd
Mainfreight Ltd
Tourism Holdings
Goodman Fielder Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd
NZ Refining Ltd
Freightways Ltd
Xero Ltd

Goodman Fielder @ Share Investor

Share Price Alert: Goodman Fielder Ltd 2
Share Price Alert: Goodman Fielder Ltd
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Goodman Fielder turning on the DRIP
Goodman Fielder to improve bottom line in 2009
Why did you buy that stock? Goodman Fielder
Goodman Fielder hit by high commodity prices
Goodman Fielder a Hedge against an economic slump
Goodman Fielder pie gets bigger

Discuss GFF @ Share Investor Forum
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  1. I agree Darren, GFF & (PPL from your other post ) are some of the best brands in the business. Both also have big interests in Aus.
    The price for GFF is very cheap right now but I agree with you it will get a bit cheaper and the Div is excellent. I'll be buying soon, maybe around 1.20 or less.

  2. RJ, GFF is at an all time low and down another cent today and seems to have some support at these levels.

    Be careful you don't miss out. It is only 5c...

  3. Any more thoughts on this one Darren? The price continues to fall. I assume that if the OCR increases and our currency gets stronger that this may affect GFF negatively again?

  4. Hi Troy, it is looking like a bargain with a gross div of nearly 13% and could well fall further. It has high debt levels which I think is worrying the market. It has the good brands and good cashflow and will have its day again. I am not going to sell but looking at FPH first. Might buy a few GFF though.

  5. Hi Darren,
    GFF certainly looking very attractive at these all time low prices and near 13% dividend yield. I am wondering, with high commodity prices and these profit downgrades, do you think GFF can maintain their 10.75c (AUS) per share dividend?

  6. They have thus far but it cant be far off being lowered. Much of the negative sentiment for this stock of late has been because of its high debt levels and poor choice for the new CEO - he has the reputation for being a plonker CEO. Couple this with high input costs and consumer moves to cheaper food during these tough times and the market has probably rightly punished it.

    I think the market has overreacted just a tad though. High commodity prices and the recession will not last forever and people will go back to their usual brands.

    I still eat Vegemite even though you just about have to mortgage your house to buy some.

    The company will never be a stunner in terms of growth but it is a good solid earner that is having difficult times and this will return once again. When? I dunno.


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