John Lambert presented his in-depth investment thesis on Bunge (NYSE: BG) at Best Ideas 2017.
Bunge is a leading global agribusiness and food company. It sources, transports, processes and distributes products that are core to the global food chain, predominantly in soybean, corn and wheat. As such, the company is positioned for long-term volume growth, driven by expanding populations and rising incomes. Additionally, it has largely exited the capital intensive fertilizer business and is seeking also to sell its low-return sugar operations. Hence prospective free cash flow generation should be much more substantial than historically. Allocation of that capital will also be more prudent, focusing on the value-added food and ingredients businesses, and returns to shareholders. This should both improve profitability and reduce the variability of profits, suggesting a higher valuation might be warranted. The stock looks cheap at 11.5x forward PE, which is also a significant discount to peers and the market. Longer-term, the shares have considerable upside to John’s estimate of intrinsic value. Strong crop fundamentals in 2017, alongside the potentially significant disposal of the sugar business, could prove to be a catalyst for realizing that value.
About the instructor:
John Lambert has 13 years of investment experience and is currently an Investment Manager at GAM supporting Andrew Green on global and UK equity funds. Prior to joining GAM in August 2007, Mr. Lambert spent six years as a pan-European investment analyst at Gartmore Investment Management. Prior to that, he worked as a UK equity analyst at M&G and a commodity trader at Cargill. Mr Lambert holds a BA (Hons) in Economics with Russian from Exeter University and is a CFA charterholder. He is based in London.
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