Post by
mountainpose on Jul 31, 2017 1:55pm
AGT is MOTLEY FOOL TOP PICK FOR AUGUST!
This is an Auto-Sumarised document. Data as of July 10, 2017 Relative to a lot of companies that are worth less than $1 billion, AGT Food and Ingredients does a lot. To tie its business into one sentence, we could say that the company is among the world's largest value-added producers and splitters of pulse crops and an international producer, processor, and exporter of staple food products to over 120 countries. AGT's legacy business, which continues to be the company's backbone, is to source these products from an origination network that spans the globe and includes thousands of local growers-many that are located in the Canadian Prairies-and move this product through to its supplier and customer network. Clearly, it's important and is likely to always serve as the company's foundation. In recent years, AGT has made several moves to address this issue: The company has added a Bulk Hauling and Distribution division to leverage its logistics networks with products not sourced by AGT. This division was bolstered in 2015 by the acquisition of two rail lines, Last Mountain Railway and Big Sky Rail, creating one of the largest Class 3 railways in Canada that includes about 650 km of track in Saskatchewan. These variables have been the root cause of a couple "Weak" quarters for AGT. When I say that, I mean "Weak" in the eyes of the sell-side analysts that try to corner this company by predicting quarterly earnings that simply aren't predictable. Higher utilization should improve margins across the company. Credit does not often freeze, but it's a variable that should be kept front and centre with AGT. Taking a Stab at Valuation To be clear, because numbers can move around so much in the short term, AGT is a slippery one to value-more so than most. The potential for margin expansion thanks to the various initiatives within the company was mentioned. Foolish Bottom Line The only other example of a unique logistical network like this in the Canadian market that comes to mind are the two railroads-CN and CP. Given AGT's collection of assets, and its orientation to something that every human needs-food-this is a company that, in my opinion, you can sit on for the next decade with the potential to be absolutely shocked by the return it may generate, if it even exists in 10 years.