Monday, October 15, 2018

BRF Lays Out A Good Restructuring Plan, But No Quick Fixes

Investors, as a group, aren’t often the most logical creatures, so maybe there will be some disappointment at the restructuring plan that BRF SA (BRFS) management laid out on October 8 during its Brazil-based Investor Day (with a New York-based day to follow on October 10). Management didn’t offer up any quick fixes or any reason to think that the business will suddenly turn on a dime. What they did offer, though, was a very sound and credible strategy for building a stronger-for-longer company with substantial upside in both its home market of Brazil and its large foreign markets.

Valuation remains tied to the eventual long-term outcomes of this restructuring plan. If and when the restructuring activities start showing the expected benefits in 2019/2020 and beyond, I fully expect the multiple to expand again. Likewise, through that process the company will put some ugly near-term annual FCF results in its rear view mirror. While the current share price looks basically fair for what BRF is today, a more bullish outlook on that restructuring plan supports worthwhile upside for long-term investors.

Read the full article here:
BRF Lays Out A Good Restructuring Plan, But No Quick Fixes

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