Cresud May Be Undervalued, But Value-Creation Is Complicated

As was the case with Adecoagro (NYSE:AGRO), Cosan (NYSE:CZZ), and SLC Agricola (OTCPK:SLCJY), my last look at Cresud (NASDAQ:CRESY) came near a time of "peak panic" in the markets regarding the outlook for stocks in general and particularly companies exposed to shaky economies like Brazil and Argentina. While I thought that Cresud looked undervalued back in January, I also thought that all of the hassles regarding management's dealings with IDBD (through IRSA (NYSE:IRS), of which Cresud owns about 64%) weren't worth the trouble.

That was a mistake, as the shares have shot up more than 80% since then. Investors have, I think, gotten more comfortable that Cresud management is not going to plunder this company (or IRSA) to support IDBD (now operated as Clal Insurance and Discount Investment Corp.), but also more comfortable with the direction of Argentina's economy and the prospect that reforms to economic and agricultural policies will underpin stronger land values in the future.

I clearly undervalued IRSA when I last wrote about Cresud, in part because I was expecting more money to be diverted toward IDBD. Correcting that mistake and updating the valuation estimates for Cresud's farmland leads to a big boost in my fair value (to about $21.25). That still leaves meaningful upside, not to mention the long-term potential for higher land values and value creation through land development, but investors should note that consolidating the Israeli operations has made the reporting more complicated and speculation on land development is an inherently risky business.

Read more here:
Cresud May Be Undervalued, But Value-Creation Is Complicated