BCD Semiconductor (BCDS)
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Adecoagro S.A. (AGRO) $400 million IPO with a market capitalization of $1.5 billion at the price-range mid-point of $14. Scheduled for Friday, January 28, 2011 |
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OVERVIEW & VALUATION |
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. Agribusiness in Argentina, Brazil and Uruguay.
. A way to play the potential global shortage of food, especially in emerging markets
. Consistently loses money but is valued at 1.5 times tangible book value at the price range mid-point of $14
. Inflation in Brazil should increase land prices |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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Adecoagro S.A. (AGRO) |
$1,526 |
3.5 |
-11 |
1.5 |
1.5 |
26% |
See financials below
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BUSINESS |
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Agribusiness in Argentina, Brazil and Uruguay. |
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. Three main lines of business: farming; sugar, ethanol and energy; and land transformation.
. Seven reportable operating segments. The farming business is comprised of five reportable operating segments: Crops, Rice, Dairy, Coffee and Cattle. Each of the sugar, ethanol and energy and land transformation lines of business is also a reportable operating segment.
. Business is inherently seasonal. |
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MACRO TRENDS |
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. AGRO generates nearly all of its revenue from the production of food and renewable energy in emerging markets.
. Therefore, operating results and financial condition are directly impacted by macroeconomic and fiscal developments, including fluctuations in currency exchange rates, inflation and interest rate fluctuations, in those markets.
. In recent years, the emerging markets where AGRO conducts business (including Argentina, Brazil and Uruguay) have generally experienced significant macroeconomic improvements but remain subject to fluctuations. |
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COMPETITION |
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Farming |
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. The majority of farming producers in developed countries can rely on specific protectionist policies and subsidies from their governments in order to maintain their position in the market.
. In general, AGRO has been able to obtain discounts for the acquisition of supplies and excess prices for production in the farming sector.
. In this sector, AGRO views SLC Agrícola, Brasilagro, Sollus, Radar, El Tejar, Cresud, MSU and Los Grobo, among others, as competitors.
. Also compete in Argentina with retailers of agricultural products, including other branded rice products, such as Molinos Río de la Plata, Dos Hermanos, Sagemuller and Villa Elisa. |
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Sugar & Ethanonl |
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. In Brazil, competes with numerous small- and medium-sized sugar and ethanol producers. Despite increased consolidation, the Brazilian sugar and ethanol industries remain highly fragmented, with more than 457 sugar mills.
. Some of the largest industry players with whom AGRO competes are Cosan, Grupo São Martinho, Açúcar Guarani, Louis Dreyfus Commodities, ETH Bioenergia, Bunge, Grupo Zillo Lorenzetti, Grupo Carlos Lyra and Grupo Irmãos Biaggi.
. Also faces competition from international sugar producers, such as those in the U.S. and the European Union, where local regulators have historically implemented tariffs, agriculture subsidies and/or other governmental incentive programs, of which some remain, to protect local sugar producers from foreign competition.fair value of biological assets and agricultural produce |
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USE OF PROCEEDS |
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21.4mm shares offered to the public, 7.4mm shares offered to the Al Gharrafa Investment Company |
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$283mm from the public IPO, $100mm from the offering to the Al Tharrafa Inv Co. |
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. $230 million to finance part of the construction costs of Ivinhema, a new sugar and ethanol mill in Brazil
. $145 million for potential investments in the acquisition of farmland and capital expenditures required in the expansion of AGRO’s farming business
. Remainder for working capital and general corporate purposes |
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Adecoagro S.A. (AGRO) |
AGRO, C+, 7 |
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Post IPO shares: 109mm |
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Agribusiness in So Am |
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Luxembourg & NYC |
2007 |
2008 |
2009 |
Sept9mos09 |
Sept9mos10 |
IPO Mkt |
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Revenue, mgr products & agricultural produce |
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Cap (mm) |
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$143 |
$254 |
$316 |
$257 |
$327 |
$1,526 |
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Chages in fair value of biological assets & agr produce |
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@$14 |
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$27 |
$61 |
$72 |
$26 |
-$77 |
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Changes in net realizable vlue of agr produce after harvest |
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$13 |
1.3 |
$13 |
$8 |
$7 |
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Operating profit (loss) |
$28 |
$21 |
$17 |
$14 |
-$100 |
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Profit (loss) |
$29 |
-$16 |
-$2 |
-$18 |
-$90 |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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Adecoagro S.A. (AGRO) |
$1,526 |
3.5 |
-11 |
1.5 |
1.5 |
26% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
2 |
2 |
1 |
7 |
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