Bunge Limited (BG) is an agribusiness and food company operating in the farm-to-consumer food chain. I like the business at this time because food is the last thing to be cut in a recession.
As of today’s close, Bunge limited (BG) has a market cap of 9.77 billion. So, if you pay 9.77 billion, you would be the sole owner of BG. BG owns a total asset of 27.6 billion. With total liability of 18.2 billion, BG’s equity amounts to 9.4 billion. Basically, 9.4 billion is the “stuff” that you get for 9.77 billion. Is it worth it to pay 9.77 billion to buy stuff with 9.4 billion “market value”? Basically, you are paying 0.37 billion for the “business”. For the 9.77 billion that you pay, only 3% of it is for the business. The other 97% is not really at risk. BG has 18.2 billion amount of liability with 27.6 billion of asset. So this company is reasonably leveraged. BG’s return on equity is around 40% this year, telling that the business is quite profitable. BG is making 750 millions in June quarter of 2008. So, assuming that income, you would get the business part of the money back in less than 2 months.
I think BG is a strong buy.
I agree Bunge is a great company, in a great recession-proof sector. It's suprised analysts five times in a row, by an average of 68% each time.
My calculations show TTM ROE at 17.27%, which while not 40%, is nothing to sneeze at.
And like just about everything else these days, it is selling very cheap... at an earnings yield of 16.63%. Compare that to treasuries yielding at most 2%-4.5%.
Of course, beware the trend.
Posted by: Mike Dilger | September 10, 2008 at 04:08 AM