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Morningstar Says No To Fonterra Offer
A novel structure to participate in Fonterra’s growth but pricing uncertainty prompts us to remain on the sidelines.
Fonterra Shareholders’ Fund Pre-IPO Report
Recommendation: Do Not Subscribe
Investment
Perspective
The Fonterra Shareholders’ Fund provides
individual investors an opportunity to participate in
Fonterra’s performance through dividends and unit price
appreciation. Being a significant exporter of milk and milk
products, Fonterra’s fortunes are inextricably linked to
growth in dairy consumption particularly in Asia and Latin
America. However we believe the company does not have an
economic moat as it generates low returns on capital. We
mainly attribute this to the commodity nature of its
business. The higher margin branded goods category
accounting for 35–40% of earnings offers the potential to
lift returns but the presence of established multinational
players like Nestle and Danone makes this task
challenging…..
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