While Cosan Ltd. (NYSE:CZZ) and Cresud (NASDAQ:CRESY) have shot up since the latter part of January, SLC Agricola (OTCPK:SLCJY) has performed more like Adecoagro (NYSE:AGRO) in going nowhere fast. Investors are no longer mad about buying up hard asset plays like farmland, and SLC Agricola has also seen historically bad weather whack its crop yields. Add in the fact that these ADRs weren't particularly liquid even in the best of times and you have a pretty uninspiring set-up for the shares.
Value remains a point of frustration with me. I can tell you that an independent appraisal values the company about 25% more than the market does even if you just look at land values and debt (and give no value to other company-owned assets or any potential appreciation through development). Likewise, a discounted cash flow analysis - typically a pretty ungenerous valuation approach for farming companies - suggests undervaluation of around a third.
It's tempting to think that this year's bad weather won't repeat again next year and that SLC Agricola's proven ability to generate above-average yields and develop its land will be better valued by the market in the future, but the illiquidity of the shares and uncontrollability of the business are both significant factors to consider.
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Weak Yields And Sentiment Weigh Heavily On SLC Agricola