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Wednesday, March 4, 2015

Investment Thesis: AgriNurture, Inc. (PSE: ANI)

Current Market Price: P 1.87 / share

Annual Sales: P 3 B

Net Income: - P 117.6 mm

Book Value: P 2.45 B

Current Market Cap: P 1.15 B

Weekly Price Chart

Daily Price Chart

Insider Transactions


First and foremost, ANI is in a business that I like - agriculture. ANI in my view is a pretty good agriculture company in the sense that it's business model starts from the planting of the crops, to harvest, post-harvest processing and all the way down to distribution. They've coined this as a "Farm-to-Plate" model. In my view, being in the business of agriculture is fundamentally sound because there is a true yield in the assets of the company - you have a farm (the assets) and the farm keeps on producing fruits and vegetables (the yield) every year, hence creating wealth to the farm owner over time. Also, when you think about it, being a seller of fruits and vegetables seems a good business because:

1. Once you have the farm and system in place, all you have to do is to wait for harvest and sell it.

2. There will always be a buyer of the produce because people will always have to eat.

3. There is a general trend in the market where people want to live a healthy lifestyle hence the proportion of fruits and vegetables in one person's diet is increasing.

4. It is somewhat less threatened by technological innovations because people still eat the same fruits and vegetables 50yrs ago they way they eat it now and we can comfortably forecast that 5, 10, 20 yrs from now, people will still eat fruits and vegetables the same way.

5. And as Jim Rogers would say, agriculture is a fantastic business to be in when the economy is great and it's still a fantastic business to be in even if the economy is not so great.

So given this established, one would think that "hey let's start a agriculture company planting and selling fruits and vegetables!" well yes, seems a good idea, but wait, there is already a company already doing that listed in the Philippine Stock Exchange and we don't have to go all the hassle of building it from scratch. Why don't we just buy it directly as play for agriculture?

And to add a sweetener to the deal that company is selling at 66% discount to it's book value (the company's Total Assets less Total Liabilities). Seems interesting! Let's dig deeper!

As we can see from ANI's time series of financial statements (see below) the company's business has been improving in the last four years. Revenue is growing, Cash is increasing, Equity is increasing, Cash from operations has gone to positive. The only negative point I see is the negative net income for the year 2012 and 2013 w/c was due to higher operating cost - this is not really that bad since this operating cost can be controlled internally.

Despite this the stock has been sold down in the market since time in memorial and was further dumped recently due to the the "Binay Scandal" since the company owner, Antonio Tiu is being dragged in the said scandal.

It is my view that since ANI seems to be a profitable business with attractive growth prospects in the future - I would like to take this negative sentiment in the company as an opportunity to get it at low prices. Remembering in mind the old investment adage that

"The time to buy is when there's blood in the streets".

So an outside investor would definitely ask, is the allegations against Antonio Tiu true or just a hoax?

This things I simply do not know.

But when when you look at the Insider transactions on ANI, Antonio Tiu bought a huge block of ANI shares at ~4 and another company insider bought another some P 3 MM worth of shares at ~2 (even after the Binay Scandal has been released). This tells us that Insiders take this negative sentiment on the company as an opportunity to buy more shares, suggesting that they see the value in the company. Since I share the same view, I decided to ride a long.


Position: Long

Average Entry Price: P 2.6202

Exposure: 6% of Philippine Portfolio, looking to add opportunistically.


Income Statement

Balance Sheet

Cash Flow 

Financial and Technical data Source:
Bloomberg, eSignal

EXIT [UPDATE: Dec 3, 2015]

Closed Position: Long

Average Exit Price: P 5.03

Profit and Loss: +91% Gain

This is not an investment advice and the author shall not be responsible or liable for any trading or investment decisions made based on this information.
The author hereby expressly disclaims any responsibility for any error or inaccuracy in the information.

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