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10-07-2008

Investors seek farm exposure

THEPRESS

Growing investor demand for exposure to the booming dairy industry is expected to stimulate New Zealand Exchange (NZX) listings, with six dairy company floats likely within the next three years.

 

Dairy land has traditionally been tightly held by farmers and even companies manufacturing or marketing in the sector have been noticeably absent from exchanges.

NZX exchange's markets development manager Geoff Brown noted one of the exceptions the success of NZX-listed New Zealand Farming Systems Uruguay, based on South American dairy farm development.

Others include Open Country Cheese, on the Unlisted exchange.

Brown said there could be six more dairy related listings in the next three years, given the market interest. The NZX was chasing such companies. Listings would give access to capital when banks were more stringent in terms of lending.

"It's clearly at the moment a very buoyant sector, and we'd be keen to see leveraged companies involved in the sector or providing services to the sector," Brown said.

But Grant Williamson, a director of Christchurch sharebroker Hamilton Hindin Greene, said only a few listings were likely in the short to medium-term.

"There might be one or two, but it's a pretty tightly held sector. You've really got the traditional farmers on the land, and because the dairy farming sector's so buoyant, in most cases it doesn't need to raise capital (given bank lending)."

Any dairy related listing would need some larger corporate backing but would be very well received.

"There is a large retail interest in the sector, and it is extremely difficult to get any sort of exposure.

Lincoln University agribusiness Professor Keith Woodford said those most likely to back the dairy sector were larger investors. But they tended to be going into private equity partnerships.

Synlait managing director John Penno said the "privately held" company had strong growth plans and would need additional capital to help pay for expansion from the 40,000 tonnes of dairy production planned in the next 12 months.

"Recently we put in resource consents to extend the processing plants we have at Dunsandel, but we're (also) active in the land market."

Investors could already trade Synlait shares via a trading desk maintained by accountancy firm Polson Higgs. Capital needs were always being considered, though there were "no solid plans" for a NZX listing.

"We are always looking at opportunities at growing our capital base," he said.

However, he did expect listings within the dairy sector New Zealand's most important industry over the medium term.

"At the moment it's held by the hands of a relatively small number of people, and there's all sorts of institutional investors and private investors who would love to have a vehicle for investing in the industry," he said.

 

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