Cosan: Well-Run, Undervalued, And Leveraged To Growth, But Punishingly Complex

 

If you’re the sort of investor who enjoys building your own models and getting into the nitty-gritty details of a business, Cosan (CSAN) will either be your dream investment or it will lead to you wearing one of those special jackets with the extra-long sleeves that tie in the back. While Cosan is a well-run company and management has shown themselves to be sound stewards of capital, it is a complex, increasingly expansive holding company with operations in a wide range of hard-to-forecast/hard-to-model businesses.

With oil prices spiking and sugar prices quite high as well, the Raizen operations should have few issues on the price side, and I still like the long-term outlook for Rumo. In the meantime, management is taking a more conservative approach with its capital allocation priorities, largely in response to what management described as the “macro-political” situation. Between Cosan’s varied operations, I believe the ADRs are worth around $21 to $25, though I will again warn that while Cosan provides good exposure to multiple attractive businesses, the financials are complex and the company is exposed to multiple drivers (weather, global commodity prices, et al) that management cannot control.

 

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Cosan: Well-Run, Undervalued, And Leveraged To Growth, But Punishingly Complex