Wednesday, December 28, 2011

Margin of Safety on Suzano Business

I usually look at the potential "permanent loss of capital", before estimating potential upside in a determined investment. Now I was wondering how much capital we could (permanently) loss in Suzano Pulp and Paper (SUZB5).

So I took all assets and properly discounted by a rate that I think is proportional to the risk of conversion of that assets in money. I also considered all liabilities recorded plus 50% of possible demands that wasn't provisioned (they only record provisions whose chances of loss are probable).

In doing so, I get a conservative net asset value of BRL 6.2 billions. Compare that figure with a market value of just BRL 2.8 billions and the conclusion must comes quickly to your mind.


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