Highlights in the week of May, 11, 2015

Dear PGM Capital Blog readers,

In this weekend’s blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of May 11, 2015:

  • USA April retail sales flat.
  • Adecoagro S.A., Q1-2015, financial results.

USA APRIL RETAIL SALES DISAPPOINTS:
The U.S.A. Commerce Department said on Wednesday, May 13th, that the country’s retail sales were unchanged in the month of April as can be seen from below chart.

Americans cut back on their purchases at autos dealers, furniture outlets, building supply stores, gas stations, supermarkets and department stores last month. Offsetting those declines were increases in spending at restaurants, clothiers, health-related stores and online retailers.

ADECOAGRO Q1-2015, FINANCIAL RESULTS:

Company Profile:
Adecoagro S.A. (NYSE:AGRO) is an agricultural company in South America. The company makes money by producing and selling products such as cattle, dairy goods, sugar, ethanol, and farming crops. Adecoagro has operations in Argentina, Brazil, and Uruguay.

As of December 31, 2014, it owned a total of 257,036 hectares comprising:

  • 20 farms in Argentina,
  • 11 farms in Brazil,
  • 1 farm in Uruguay
  • 3 rice processing facilities in Argentina
  • 2 dairy facilities with approximately 6,551 milking cows in Argentina.
  • 10 grain and rice conditioning and storage plants in Argentina.

As of March 31, 2015, the company owned 3 sugar and ethanol mills in Brazil with a sugarcane crushing capacity of 10.2 million tons; and had a cogeneration capacity of 232 MW.

Adecoagro S.A. was founded in 2002 and is based in Luxembourg.

On Thursday, May 14, the company reported its Q1-2015 financial results with the following highlights:

  • Adecoagro recorded Adjusted EBITDA of $35.8 million in Q1-2015, representing a 3.1% increase compared to Q1-2014.
  • Adjusted EBITDA margin during Q1-2015 reached 32.8%, compared to 36.7% in Q1-2014.
  • Net Income in Q1-2015 was US$13.8 million, US$11.2 million higher than in Q1-2014.

Source:

PGM CAPITAL COMMENTS:

Disappointed USA April Retail Sales:
It shouldn’t be a surprise that the latest batch of US numbers are somewhere between disappointing and catastrophic.

  • First-quarter GDP was flat and is about to be revised negative.
  • Retail sales were flat in April, the first month of the second quarter, with business inventories and import prices pointing in the same grind-to-a-halt direction.

The US is now looking at zero growth for the entire first half of 2015. Six years into a recovery, with record low interest rates and a recent doubling of government debt, that’s a bit of a dilemma. Especially given the Fed’s threat to raise interest rates in the next few months.

As can be seen from below chart, the dollar is reacting to this prospect exactly as one would expect, by falling like a stone, after it has hit a 12 year high, by mid March this year.

US-Dollar Index 5-day chart

Gold, in the meanwhile, is acting like the reciprocal of the dollar, adding US$30 an ounce since Wednesday May 13th, to end the week at US$ 1223.65 an ounce, as can be seen from below chart.

Adecoagro Q1-2015 financial results:
As can be seen from below table, the legendary Investor, George Soros at the end of 2014, owned approx. 21.5 percent of the company’s stock

AdecoAgro Top Institutional Holders:
Holder Shares % Out Value* Reported
Ospraie Management, LLC 10,650,214 8.84 85,308,214 Dec 31, 2014
Jennison Associates LLC 8,099,503 6.72 82,776,920 Mar 31, 2015
Brandes Investment Partners L.P. 6,751,054 5.60 68,995,771 Mar 31, 2015
Wellington Management Company, LLP 4,711,480 3.91 37,738,954 Dec 31, 2014
PGGM Investments 4,500,000 3.73 45,990,000 Mar 31, 2015
Soros Fund Management LLC 25,915,076 21.50 207,579,758 Dec 31, 2014
Tradewinds Global Investors, LLC 2,606,674 2.16 26,640,208 Mar 31, 2015
Global Thematic Partners, Llc 2,102,426 1.74 21,486,793 Mar 31, 2015
EMS Capital LP 1,835,491 1.52 14,702,282 Dec 31, 2014
Bienville Capital Management, LLC 1,640,475 1.36 16,765,654 Mar 31, 2015

Source:

As can be seen from below table -updated May 5, 2015- currently, AGRO is one of the top 10 holdings for George Soros investment portfolio.

Ticker Shares Value ($1000)
SPY 5,341,000 1,102,543
BABA 4,444,604 369,969
YPF 11,650,176 319,797
AGRO 25,915,076 264,852
DOW 4,629,386 222,118
ENDP 2,217,176 198,881
EBAY 3,327,467 191,928
ZTS 4,106,735 190,101
CY 13,216,666 186,487
LVLT 3,454,781 186,005

Source:

Below 2-year chart, shows that the shares of the company has appreciated in the last 2 years with approx. 40 percent, for which the biggest increased has happened Year-To-Date.

Based on the company’s business model, and the fact that legendary investor and Guru, is the biggest share holder in the company, we have a BUY rating on the stock of the company.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Commodities, Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

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