Agria (GRO) saw big accumulation begin Friday and is ready to explode. It owns a controlling stake in PGG Wrightson (PGW), New Zealand's largest agricultural services company. New Zealand is the world's fastest growing developed economy with 3Q GDP growth of 3.5% and projected 4Q GDP growth of 3.71% - due to its booming agriculture sector, which saw output grow 17% in the 3Q. New Zealand's exports to China of dairy and lamb/sheep meat products are up 80% this year and GRO will benefit more than any other U.S. traded stock.
GRO's 80.81% owned Agria Asia subsidiary owns 379.1mm PGW shares or 50.22% of the company, which trades overseas on the NZX for $0.43 per share. Agria Asia's shares are currently worth NZD$163mm or USD$134.5mm, valuing GRO's 80.81% stake at USD$108.7mm. With 55.38mm shares outstanding, GRO's stake is already worth $1.96 per share.
Exactly two weeks ago, GRO hit a new 52-week high of $1.77 and PGW at the time was $0.40 valuing GRO's stake at $1.83. GRO came within $0.06 of the value of its PGW stake, therefore, look for GRO to explode to a new 52-week high of $1.90 early this week.
GRO's chart shows that it's in the most solid uptrend in the market, consistently bottoming at higher lows before exploding to new 52-week highs on strong volume. With PGW's fiscal 2014 first half earnings due to be released February 25th and their EPS this year likely to rise 100%, GRO could break $2 this week. Look for GRO to explode when it breaks $1.77.
GRO also owns 100% of a China seeds biz with last year's revenues up 98% to $17mm. Its closest comparison Origin Agritech (SEED) gained 19% on Friday to $2.40 and currently has an enterprise value of 1.04X sales - despite their seed revs down 8%. If GRO's China seeds biz with 98% rev growth was worth a mere 1.04X sales to match SEED, GRO deserves to trade $0.32 per share above $1.96 or for $2.28 per share.
We have so far purchased 550,000 GRO shares and don't intend to sell until GRO is trading at a fair value.