Like most equities in Brazil, reaching out to grab SLC Agricola (OTCPK:SLCJY)
(SLCE3.SA) has been like grabbing a falling knife. While the local
shares haven't done quite as bad (SLCE3.SA's shares down about 12%), the
ADRs have fallen another 35% or so since I last wrote about the company,
as the shares have been hit hard by a weak Brazilian real, some
productivity challenges, and ongoing concerns both about Brazilian
equities and farming companies in a lower commodity price environment.
The
performance of Brazilian equities over the last year or so has been an
abject lesson that things can always somehow manage to get worse. Even
so, SLC Agricola's share price seems to reflect a level of pessimism
that seems out of line with the real fundamentals. Although the
company's land is consistently more productive than U.S. cropland when
it comes to cotton and soy and not too far out of the running with corn,
the market values SLCJY's land at nearly half the value of U.S.
cropland. Even allowing that the challenges of the Brazilian market
(including higher logistics costs) should demand a discount to U.S.
values, I have to wonder whether the market isn't overly discounting the
long-term value of SLC's farmland, and by extension, the shares of the
company.
Read more here:
SLC Agricola Closer To Dirt Cheap
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