Saskatchewan Wheat Pool’s publicly traded shares should increase in value by more than 20 percent in the coming year, says a leading market analyst.
RBC Dominion Securities last week issued a report setting a new 12-month target price of $21 per share for the pool’s Class B common shares. Last week’s closing price was $17.30.
Just one month ago, the target price was $19, but the near-record size of the 1996 crop is expected to mean higher handlings and higher earnings for the pool, according to RBC analyst Irene Nattel.
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In an Oct. 31 report, she projected the pool will handle 11.25 million tonnes of grain in 1996-97, up from the previous estimate of 10.5 million tonnes.
Those higher handlings translate into projected earnings per share of $2.10, up from $1.88. The pool’s earnings per share in the 1995-96 fiscal year was $1.64, based on profits of $48.4 million.
“In light of the increase in our 1997 earnings per share estimate and the farmers’ intentions to once again increase the seeded area for the 1997 crop season, we are increasing our one-year target price on SWP.B to $21,” said Nattel.
That reflects a common share price of 10 times the earnings per share, described by market watchers as an appropriate level for a commodity-based company such as Sask Pool. The company’s 1995-96 results produced a ratio of 10.4 times the earnings per share.
Nattel described the pool’s stock as “extremely undervalued” relative to comparable publicly traded companies and said the investment broker continues to give the pool its highest rating, classifying it as a strong buy.
The pool’s share price has been on a steady climb since it opened for trading on the Toronto Stock Exchange at $12 on April 2. It stood at $14.10 when the new fiscal year began Aug. 1, hitting a peak of $17.75 on Oct. 21.
Sask Pool officials are not allowed to comment on stock price projections for legal reasons, said chief financial officer Lyle Spencer.
