Company background

Cobram Estate Olives (Cobram) is a vertically integrated producer and marketer of olive oil products with operations in Australia and USA and export customers in ~17 counties. Established in 1998, today Cobram owns or leases ~6,889Ha (~99% company owned) of maturing olive groves across Australia (6,584Ha) and California (305Ha), with ~3,182Ha of olive suitable land for expansion, and packaged olive oil sales reaching $123.2m in FY21.

Fast growing brand with maturing orchard assets

Market leading Australian brands: Cobram has developed and owns two market leading Australian olive oil brands in Cobram Estates and Red Island which combined account for ~45% of the Australian Extra Virgin Olive Oil (EVOO) market, a segment which has seen retail sales value has grown by +37% since FY17.

Exposure to a maturing orchard asset base in Australia: ~39% of the Australian orchards have yet to reach maturity and ~15% have yet to reach first harvest. Maturing company orchards combined with access to additional fruit from immature third party plantings provide access to a step change in olive oil volumes over the next decade.

Exposure to a North American development asset: Since FY14 Cobram has grown to be the third largest producer and second largest Californian olive oil brand in the US. The transition from bulk to branded producer should benefit margins in the long run, while providing an outlet for any surplus oil inventory from the Australian groves.

Investment view: Initiate coverage with an Buy rating

We initiate coverage on Cobram with a Buy rating and $2.30ps target price. Cobram offers exposure to a premium FMCG brand in a fast growing market. In addition the business should benefit from an expanding orchard asset base lifting oil supply and through the cycle earnings. As a compliance listing that provides a liquidity event, there is the potential of a near term stock overhang. However, we would see liquidity in an off production year as likely to provide buying opportunities.

To read the full report click the read more button below.

View Detailed Report
Authored by Jonathan Snape – Analyst – at Bell Potter Securities, 6 September 2021
Important Disclaimer—This may affect your legal rights: Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. This is general investment advice only and does not constitute advice to any person.
Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended.