Sun mull.26 Jun 2022 12:33
Will REA test its historic low of c.60p which was unthinkable a year or so ago. Looking at the one year graph suggests its a possibility, having slumped from a 208p high to 115p this year a 44% fall, then anything is possible particularly if the US drags the global economy into a full blown recession, then all bets are off.
Trying to catch the bottom is a risky business as now one has to factor in a meddlesome Govt and its audit policies, extra levies and a palm price that stubbornly resists rising. Hardly a background investors seek. Perhaps sentiment will change once stockpiles are flushed through the system and demand reverts to the normal?
For the longer term view its a close call as at anywhere near 100 or sub, the sp is well undervalued given our coal and stone interests will be highly cash generative and i doubt are 'priced in'. However REA intend to exit our Coal interests as soon as practicable and concentrate on Stone where demand is substantial and a valuable adjunct to our palm Estates. If the palm price can stay above $1300 through this half year should see REA continue to make money.
Maintaining an average selling price of c.$770 during H1 will be crucial for revenues though much depends on where palm prices go from here and our ability to get ahead of the debt drag. I guess its watch this space but I'm not that bullish in the short term as the negatives keep piling up.
I'm fence sitting unable to decide which way to jump. My gut feeling is the sp is going lower. So I'm erring on the side of caution, a cop out I know but what's a poor boy to do?
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