SLC Agricola Still Differentiated On Quality, Less So On Valuation

Brazilian ag company stocks have perked up recently (or at least Adecoagro (AGRO) and SLC Agricola (OTCPK:SLCJY) ), finally driving some good news for investors who’ve seen a difficult stretch with these stocks. Specific to SLC Agricola, the shares are up about 30% from my last article on the company, helped by both ongoing strong equation by the company and improving commodity prices. I also believe the company’s ongoing efforts to drive toward an asset-light model are contributing, with another sale-leaseback transaction at an attractive premium to the appraised value.

The biggest challenge I see with SLC Agricola is whether the company can continue to pass over ever-higher hurdles. Management believes they can improve yields and profit margins even further, but they’re already one of the best in Brazil, and bad weather or adverse commodity market moves can undo a lot of that in the short term. Increasing sale-leaseback activity could still add value, but the shares aren’t an easy valuation call anymore.

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SLC Agricola Still Differentiated On Quality, Less So On Valuation