16 November 2011
Landkom (LKI LN), a 74 ths ha farming enterprise in Ukraine, completed its winter planting campaign, the company reported today. Landkom planted a total of 29.8 ths ha with winter crops, up 3.4% y-o-y. Rapeseed was planted on 15.0 ths ha (vs. 12.9 ths ha in 2010), winter wheat on 10.1 ths ha (vs. 13.1 ths ha in 2010), barley on 3.8 ths ha (vs. 1.9 ths ha in 2010), rye on 0.6 ths ha (vs. 0.3 ths ha in 2010) and forage and other crops on 0.4 ths ha (vs. 0.6 ths ha in 2010). Landkom has yet to report on its corn harvest results, which it expects to complete by end-November. Yegor Samusenko: We deem the key positive from the announcement that company is still a going concern. This year’s disappointing rapeseed harvest led to operating losses and forced management to announce a strategy review. The company continues to focus on rapeseed (half of winter planting), which preserves yield risk due to high execution risk: this winter conditions in Ukraine are expected to be difficult, according to Hydrometcenter. Following the management’s failure to turnaround the company in a farmer-friendly year like this, we deem the stock now as a pure acquisition story. Due to the company’s widely dispersed shareholder structure, we believe the acquisition price should come well above the current depressed stock levels to get shareholders to accept it.