3 Portuguese Value Stocks
- By Holmes Osborne, CFA
I recently noticed a fund on GuruFocus that I'd never heard of: azValor Iberia FI. It's a fund focusing on Spain and Portugal (Iberia). Three of its recent holdings have little following in the U.S.: Deoleo SA (OLE.MC), Altri SGPS (ALTR.LS) and Nos SGPS (NOS.LS). Sydnee Gatewood of GuruFocus has also recently written on the fund.
Warning! GuruFocus has detected 2 Warning Signs with XMCE:OLE. Click here to check it out.
The intrinsic value of XMCE:OLE
Right off the bat, I recognized one of Deoleo's products: Bertolli Olive Oil. According to the website, it's the No. 1 olive oil in the world. The company is basically a penny stock; it trades at 0.185 euros (95 cents) and has a market cap of 213 million euros. Revenues were 817.3 million euros last year and estimated to be 827.4 million euros this year, according to Bloomberg. There is quite a bit of debt with 544 million euros to only 29.4 million euros in cash. CVC Partners owns 50.1% of shares.
Last year, Deoleo experienced mediocre results with a bad year for olive growers. This year, it expects EBITDA to come in at 60 million euros compared with last year at 35.6 million euros. Moody's downgraded the debt from B3 to B2. CVC offered to buy the company for double what shares are trading at now back in 2014. I guess azValor is betting on a rebound in olive prices. The stock is certainly down.
The next company is Altri SGPS. Altri has a market cap of 643 million euros. What's enticing is the 8% dividend yield and stock that trade at a price-to-earnings (P/E) multiple of 6. That's old school value investing. The company manages over 207,000 acres of eucalyptus forests in Portugal. The pulp is used to produce tissue, paper and the biomass can be burned to produce electricity.
Again, you can see why the stock was purchased - for the dividend yield and low PE. But what about the eucalyptus pulp market? I'd want to learn a little more before investing in that one.
The last stock is NOS SGPS. NOS has a market cap of 3.1 billion euros and a dividend yield of 2.65%. The company is in satellites, cable and mobile phones in Portugal. Sales have doubled in just seven years (but shares outstanding have grown, too), and free cash flow is 100 million euros to 200 million euros.
It seems that growth has been quite good. According to this presentation, there are more mobile device users, paid subscribers for cable and satellite, and revenues per user are up, too. NOS is the third-largest player in mobile in Portugal.
So there you have it. Three Portuguese value stocks. Olive oil, eucalyptus pulp and TV/telecom. I must admit that I'm not an expert in these three industries, but the stocks do look attractive from a value investing standpoint.
Disclosure: We own none of the stocks mentioned.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Signs with XMCE:OLE. Click here to check it out.
The intrinsic value of XMCE:OLE
