The Costa Group Holdings Ltd (ASX: CGC) share price is lower today on news the company has signed a new lease implementation deed.
The post The Costa (ASX:CGC) share price is slipping lower today. Here’s why appeared first on The Motley Fool Australia. –
The Costa Group Holdings Ltd (ASX: CGC) share price is slightly down today on news the company has signed a lease implementation deed with Macquarie Infrastructure and Real Assets (MIRA).
At the time of writing, the Costa share price is marginally lower at $4.01, down 0.99%. In comparison, the S&P/ASX 200 Index (ASX: XJO) is also trending lower, trading at 6,695 points, down 0.9% at the time of writing.
Quick take on Costa
Costa is an Australian horticultural company that grows, packs and markets fresh fruit & vegetables. The business operates in three main categories: Produce, Costa Farms and Logistics, and International.
Costa manages more than 4,700 planted hectares of farmland, 30ha of glasshouse facilities and three mushroom growing facilities. In addition, the company has international joint ventures covering six blueberry farms in Morocco and four berry farms in China.
What did Costa announce?
In today’s release, Costa advised that the farms which it leases from Vitalharvest could change ownership to MIRA. The implementation deed will come into effect if MIRA’s takeover bid of Vitalharvest is successful.
This can happen either by MIRA acquiring 100% of the issued units in Vitalharvest via a trust scheme; or acquiring all of the assets from Vitalharvest should the trust scheme not be approved.
Currently, Costa leases 7 farms from Vitalharvest. These include 3 citrus farms in South Australia, and 2 berry farms in each of New South Wales and Tasmania.
The signed lease implementation deed states a fixed rent lease agreement for each of the farms for 20 years. There’s an additional 10-year option should both parties be satisfised with the arrangement during the lease period.
Costa said the rental yields were in line with current market conditions for operating large-scale horticulture assets. Furthermore, the company’s existing contracts with MIRA were relatively on the same terms.
Costa pointed out that the new leases would provide long-term rental certainty for its citrus and berry assets. The current agreement would have seen its fixed and variable rental components up for review in 2026.
About the Costa share price
The Costa share price has been trending higher since the beginning of the year, up 62%. However, when looking at its shares over a 2-year timeframe, the Costa share price is down around 40%.
Costa has a market capitalisation of $1.6 billion.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.