Ongoing Improvements In Rail Sweeten Cosan's Story

I liked Cosan Ltd. (CZZ) roughly a year ago, and between significant ongoing improvements in the rail business and a buyback at the holding company level, the shares have risen about 80% since then – outperforming the local performance of both Cosan SA (CSAN3) and Rumo (RAIL3), to say nothing of peers and rivals like Adecoagro (AGRO) and Sao Martinho.

Cosan has taken a “hunker down” approach to the current weak environment in sugar, while continuing to grow the retail fueling business and focusing considerable attention on the rail assets. The valuation discount for Cosan Ltd. has shrunk noticeably, and with that management may feel freer to invest its cash flow into growth (instead of buybacks), something management has made clear would be their preference. Although I still think Cosan is a very well-run company and a great collection of assets, I don’t see the same striking discount to fair value as before.

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Ongoing Improvements In Rail Sweeten Cosan's Story