The broker's head of research, Mark Lister, said the company's business model was "conceptually attractive", but it came with an above-average risk profile from exposure to climatic variables and commodity prices, as well as risk from its South American focus.
"The location of the group's assets in Latin America suggests, based on historical experience, an element of political-economic risk," he said.
There was also an element of exchange-rate risk given the group's functional currency was in United States dollars, which, combined with the other factors, created some uncertainty with regard to medium-term earnings.
Chris Timms, a broker with ABNAMRO Craigs, Chris Timms, said, other than being based in South America, risks with the company were nothing unusual for a primary industry stock.
But there were some real advantages from the low establishment costs, stock management techniques and the quick turnaround from native pasture to productive dairy farm.
New Zealand Farming Systems Uruguay (NZFSU) was established in 2006 by rural servicing company PGG Wrightson to take advantage of the relatively low price of Uruguayan land and New Zealand farming technology to develop dairy and support farms.
The company has said land can be acquired and converted for 20% to 25% of the cost of New Zealand dairy farms, while changing the type of pasture grown from traditional native species can treble grass production, leading to better-conditioned animals and higher milk production.
Mr Lister said the Uruguayan dairy industry had a similar co-operative structure to New Zealand's, with Conaprole the largest company.
Unlike New Zealand, suppliers to Conaprole did not need to own shares in the company to supply it, and the company recently announced expansion plans to handle the milk coming from NZFSU.
Milk prices received by NZFSU in April had increased 25% since the company was listed in December 2007, and in April it was receiving the equivalent of $7.35 a kg for milk solids, prompting an increase in the company's forecast earnings, made in February.
