AGT FOOD & INGREDIENTS $36.46 (Toronto symbol AGT; TSINetwork Rating: Extra Risk) (604-231-1100; www.agtfoods.com; Shares outstanding: 23.9 million; Market cap: $840.7 million; Dividend yield: 1.7%) buys, processes and distributes a range of pulses—peas, beans, lentils and chickpeas—as well as other specialty crops.
Based in Saskatchewan, the company owns 13 processing plants in Canada, nine in Turkey, four in Australia, two in the U.S., one in China and another in South Africa.
In the three months ended March 31, 2016, AGT’s cash flow per share jumped to $0.83 from $0.37 a year earlier. Revenue gained 14.6%, to $441.4 million from $385.2 million. The increases stem from the company’s expanded processing and recent acquisitions, including short-line railways and bulk-loading facilities in Saskatchewan.
A big part of AGT’s success has come from its shift to selling higher-profit-margin products such as ingredients and packaged foods instead of just cleaning, splitting, sorting and bagging bulk crops.
Demand for pulses is very strong right now, especially in the wake of back-to-back droughts in India—a major market. In the short term, this could hurt AGT because demand has cut the amount of Canadian pulses in storage. That means there’s less flowing through to the company’s plants. But AGT stands to gain significantly later this year as Canadian farmers harvest a record-sized crop of pulses. Many of them switched over from raising canola in order to benefit from rising prices.
The stock trades at just 16.2 times the $2.25 a share AGT is expected to earn in 2016. It yields 1.7%.
AGT Food & Ingredients is a top pick for 2016.
