If you really hate your brain and want to punish it, dig deep into Cosan Ltd (NYSE:CZZ). While this Brazilian-American conglomerate has a lot of positives going for it, including a strong position in ethanol and sugar production, fuel distribution, and rail in Brazil, it also has a complex holding company structure, a lot of debt, and a lot of moving parts to factor into any sort of valuation analysis.
My last update on Cosan took place right around the period of peak pessimism on Brazil, with both the stock market and currency around five-year lows. Since then, not only has Cosan seen stronger markets for ethanol and sugar, but more optimism about a recovery in Brazil and a stronger currency. The shares have soared more than 100% since my last update and yet I still think there could be upside left.
Adjusting for the company's capex plans, the recapitalization of Rumo, and the exchange rate, my fair value rises to around $11, suggesting meaningful upside is still possible. Keep in mind, though, that what the currency markets give they can also take back and Cosan is a high-beta play on Brazil, not to mention a complicated company in its own right.
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Cosan Buoyed By Better Operating Results And Optimism On Brazil