2011 Media Releases

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of agribusiness GrainCorp Limited (ASX: GNC) with a Hold recommendation.

Research analyst Dominic Rose said, “The longer outlook for the global agricultural sector appears favourable to us, underpinned by growing food demand – particularly from emerging economies – and supply constraints, which should benefit agribusinesses such as GrainCorp.

“That said, with the stock trading broadly in line with our valuation, we initiate coverage with a Hold recommendation.”

GrainCorp provides grain handling, storage and logistics, port and marketing services to the east Australian grain industry. Additionally, the company is the world’s fourth largest commercial malt producer and owns 60% of Allied Mills, a major Australian flour miller.

According to the Deutsche Bank analysts, GrainCorp offers investors non-GDP related exposure given its earnings are predominantly leveraged to east Australian grain harvest volumes and demand for malting barley which are both largely independent of economic growth.

“However, while the longer-term outlook for the sector appears favourable, we see shorter-term earnings growth challenges on the back of a record FY11 harvest,” Rose said.

“GrainCorp is impacted by seasonal forces, which can create forward earnings uncertainty and volatility. Drought can also be a key risk to earnings, as evidenced in 2007 and 2008.

“With the FY12 harvest unlikely to match FY11, in our view earnings growth will be challenging.”

According to the analysts, the Australian grain sector has corporate appeal following high levels of merger and acquisition activity in recent years as players chase scale, vertical integration and earnings diversification.

For further information, please contact:

Deutsche Bank AG    
Name: Amy King   
Phone: +61 (0) 2 8258 2505
E-mail: amy.king@db.com