- Fifth earnings upgrade since March 2022
- Favourable trading conditions across all core activities
Specialist agricultural products supplier Wynnstay (WYN:635p) has upgraded profit guidance for the fifth time since March this year.
In early September, a combination of ongoing upward pressure on fertiliser prices, stock gains, better trading margins and significantly higher grain trading volumes forced house broker Shore Capital to push through a 26 per cent profit upgrade. Favourable trading conditions have continued across all core activities since then, notably in both grain and fertiliser categories, so much so that analysts have upgraded their estimates by a further 11 per cent. Shore Capital now predicts an eye-catching 87 per cent increase in pre-tax profit to £21.5mn on 39 per cent higher revenue of £695mn in the 12 months to 31 October 2022. On this basis, expect earnings per share (EPS) of 78.7p and a dividend of 16.6p.
Sensibly, Wynnstay’s management is leaving its guidance for the 2022/23 financial year unchanged, reflecting the uncertain macroeconomic background, and inflationary pressures for the business, farmers and the consumer who ultimately buys the produce. Shore Capital is forecasting annual pre-tax profit of £12mn on slightly lower revenue of £672mn, implying the shares are rated on a forward price/earnings (PE) ratio of 14.2, offer a prospective dividend yield of 2.7 per cent and trade on a price-to-book value of 1.15 times. That’s a fair rating and one that has scope for expansion given the greater emphasis now on food safety, food security and domestic food production.
So, having selected the shares, at 424p, in my 2021 Bargain Shares Portfolio, and booked dividends of 30.9p, I suggest top slicing two-thirds of your holding to recover all your initial capital, and run the balance for free targeting the 2014 and 2017 all-time highs (685p to 690p).
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