Recent Positive Analysis from Raymond James
Recommendation
We continue to recommend that small-cap growth investors seeking exposure
to the global agriculture complex buy shares of MBAC.
Analysis
MBAC is a highly differentiated junior fertilizer developer, in our view, boasting
several key attributes that we believe portend to a bright future. In particular,
we highlight the company’s:
(i) Brazilian geography—our preferred jurisdiction
for junior fertilizer developers;
(ii) Strong management team—with established
track records and a broad depth of Brazilian experience;
(iii) Near-term
production—with its fully-funded, flagship Itafós project poised to commence
production in 4Q12; and
(iv) Compelling project pipeline—including its Santana
(P2O5) and Araxá (ROE/P205) projects
Our key takeaways from the recent tour include:
? Itafós Still on Time and on Budget—Despite small recent setbacks
associated with civil works construction, MBAC still expects Itafós to be on
time and on budget, with initial production expected in 4Q12. We have,
however, elected to revise our 2012/13 estimates to reflect the potential
for initial production to be pushed into the final weeks of the year.
? SSP Markets Demonstrating Healthy Growth—Recent industry data
indicate that fertilizer demand in MBAC’s two primary target markets in
north-central Brazil continues to demonstrate healthy growth.
? Frontier Regions Expected to Benefit Santana—Albeit still considered
remote today, Santana appears ideally positioned to service one of Brazil's
most promising agricultural frontier regions.
Valuation
Our $4.50 target price is based on a 1.0x P/NAV target multiple applied to
Itafós (NAVPS $2.97) and a 0.4x to Santana (NAVPS $3.83). We apply a 0.4x
target multiple at Santana, due to its early development stage and risk profile.