I'm starting to analyze Petropar, a holding company that operates through its subsidiaries in manufacture and trade in diversified portfolio of intermediate products for oriented industries to the market of consumer goods. The geographical scope of business in aluminium beverage cans is Brazil; in nonwovens, the Americas, and plastic covers the Southern Cone of South America.
Below the main facts I've already collected:
- Revenue Composition: 54% from aluminium beverage cans, 35% from nonwoven fabric and 11% from plastic lids.
- Earnings Composition: 86% from aluminium beverage cans (probably because comes from Brazil), 17% from nonwoven fabric and -3% from plastic lids.
- Owns more than BRL 100 million in properties (land and buildings, registered at cost, must be worth much more now).
- Tag Along of 80% for ordinary and preferred stocks.
- Company is investing heavily: it will more than duplicate aluminium beverage cans plant (where the margins are higher) until begining 2012 and increase in 45% the nonwoven fabric plant.
- The last 12 month P/E (so I'm not considering new plants) is 7 and ROE 25%. Debts are under control.
- Petropar has a millionaire dispute against Itau. It won in the first and second instances and the last time the value was updated (2007) it was about BRL 200 millions.
- The company generated 110 mi of cash flow in 2010, but as it's investing heavily I can make no idea about what should be its FCF.
So, what's your opinion? What are the negatives points you can see?
2 comments:
I think you should study the period between 2006 and 2008, to find out why the margins, Earnings and ROE were going down.
Just to finish our talk late in the morning, I like to prevent the risks of determined stock by buying little of them in relation to my portfolio/equity. I got a very small quantity of PTPA4 today, so even if it falls 100% I lose just about 1-2% of my personal equity.
Doing so, I can have a nice portfolio with attractives stocks, that nobody wants now, with great discount. And if something really goes wrong, I don't lose to much. I can't, and don't want to, spend much time analysing every single detail.
That's my way to deal with risks Klerman told about in a previous post. And sure it's not the way Buffett does.
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