NAOS News & Insights

NAOS Conviction Calls - Lindsay Australia

March 10, 2015

Unless you live in a bubble, themes playing out in the macroeconomic environment will impact on the performance of companies and their issued capital.

One sector that we believe will perform over the medium term, and which we believe has been out of favour for some time, is agriculture.

Australians are adopting a healthier lifestyle and fresh food and produce is a major factor that contributes to healthy living. Australia’s agriculture industry has also been largely affected by the corporate interest of Asian companies. It is clear to see that from this interest Australian produce is in high demand amongst Asian consumers.  The recently China free trade agreement will no doubt drive this interest further over the longer term.

Looking then at which companies are poised to perform within this thematic and on an independent basis our attention turns to Lindsay Australia (ASX:LAU).

What do they do?

Lindsay Australia is a transport & logistics company originally founded by the Lindsay brothers and continues to be run within the family. 3 divisions of Lindsay Australia are:

  • Lindsay Transport (founded in 1953) – Road transport, logistics and warehousing services operating up and down the east coast. Through its fleet of refrigerated vehicles, it is the largest transporter of fresh produce in Australia.
  • Lindsay Rural (founded in 1975) – is a rural merchandise business providing specialised services to farmers.
  • Lindsay Fresh Logistics (founded in 2014) – Lindsay have recently opened a new facility at the Brisbane fresh food markets. Lindsay have consolidated all its surrounding operations to this facility and can now provide customers with fumigation & freezing services which are seen as some of the best if not the best available in Australia which is a big advantage for exporting produce.

Why we like Lindsay Australia

Through its 3 divisions, the company has been able to provide end to end services for farmers, from agronomist services all the way through to transporting fresh produce to supermarkets. This integration sees produce from the ‘paddock to plate’ within 24 hours and results in the company being a vital cog in the provision of fresh food to our Australian supermarkets and overseas consumers, where Australian produce attracts premium prices.

Lindsay has been able to consistently maintain premium margins relative to peers driven more so by internal efficiencies rather than significant pricing differences.

Our analysis shows that if the company can achieve 10% revenue growth and marginally improve EBITDA margins (which we see as possible with the opening of the Lindsay Fresh Logistics facility in FY15) it should trade on a 7x EV/EBITDA and a fully franked dividend yield of 4% for FY15due to earnings growth and market consolidation. FY16 will be the first year where investors will see the full benefit of the new Fresh Logistics Business so we anticipate further revenue growth and margin improvements as this facility fills up.

NAOS is a shareholders in Lindsay & it is in our view under owned and under researched by the market.

We see Lindsay as a high quality business with very experienced management and an inexpensive way to the agricultural thematic without the direct commodity/weather risks faced by other agriculture companies.


We are pleased to share our investment insights with you. This information is general only and does not take into consideration the investment objectives, financial situation or particular needs of any reader. Information contained herein may not be appropriate for your personal situation and we encourage you to consult a financial advisor before making any investment decision.  


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