A premium brand in a fast-growing market

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 around 6,889 hectares (around 99% company-owned) of maturing olive groves across Australia (6,584Ha) and California (305Ha), with around 3,182Ha of olive suitable land for expansion, and packaged olive oil sales reaching $123.2 million in FY21. 

Source: Bell Potter Securities Estimates

A 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 a Buy rating 

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.

We initiate coverage on Cobram with a Buy rating and $2.30ps target price. A copy of Bell Potter's initiation report is available via the PDF below.

Never miss an insight

Enjoy this wire? Hit the ‘like’ button to let us know. Stay up to date with my content by hitting the ‘follow’ button below and you’ll be notified every time I post a wire. Not already a Livewire member? Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.