Saturday 5 October 2013

Analysis of Südzucker

A German agricultural company with main focus on sugar

Company: Südzucker

Business: A German agricultural (mainly sugar) company. They are divided into four segments: Sugar (Südzucker & Agrana), Special products segment (Bene, Freiberger etc.), CropEnergies segment and Fruit segment (Agrana and Austria juice). For the full list please take a look here.

Active: They are mainly active in Europe. Some production in China and they are present also in the US but still... Europe is their base which is also no wonder since the German sugar beet farmers own 52% of the company.

P/E: 7.4

This company was analysed due to a request that can be found here.

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Südzucker is excellent with 7.4 and the P/B falls very nicely in my mouth with 0.9 which without doubt gives a very clear buy signal according to Graham. They have a at least to me surprisingly high earnings to sale of 8% and the ROE is 12.5 which could be better but is semi-ok. The book to debt is also excellent with 1.2. In the last five years they have managed to have a yearly growth of 6.1% which is very good and this leads to a motivated P/E of 19 to 21 which means that Südzucker is highly undervalued by the market today. they pay a very nice dividend of 4.2% which only represents 31% of their earnings so no fear of dramatic decreases there.

Conclusion: Südzucker is indeed a contrarian stock and Grahams says that it is a buy and I do believe that it is an excellent buy and hold company. When to buy it and at which price I can not say. It looks cheap today but there are buts...These buts are for instance the European sugar tolls (when will we get cheap sugar cane sugar flooding Europe?), I have some doubt that the motivated P/E will be reached in the close future but I am sure that they will pay a nice dividend year after year. I also do not know what to think about the 52% beet farmers. The reason is... that if I ever see 52% fund institutes owning a company then I walk away from it and the question is how active are these sugar beet farmers and active in whose favour? I mean they want the best price possible for their sugar beets because that they see in their hands but benefits for Südzucker comes in second hand. So I really do not know here. Still, I will today not invest in Südzucker even though it looks good and I believe them to have a great future.

As a comment to Falk: You made once again an excellent suggestion for a great German contrarian stock / company. You seem to have what I am missing (as a foreigner) which is the background knowledge for the great German companies and I am very happy that you take the time to give me suggestions for companies to analyse here on the blog. It would be interesting to find out what you already have today in your stock portfolio because I am certain it will look great! Once again thanks for your suggestion!

If this analysis is outdated then you can request a new one.


Falk said...

Thank you Fredrik for your detailed analysis. And thank you, of course, for your compliment, regarding my stock suggestions :)

I am also self employed and therefore since 2013 building up an investment portfolio for my retirement. My stock portfolio is more concentrated then yours (5 to 7 companies maximum), but I also put some money in ETFs, just to make sure, that I won't get broke :)

So, here are the stocks I currently own (in alphabetic order):

Data Modul AG - DE0005498901

K+S - DE000KSAG888

Sanacorp Pharmaholding - DE0007163131

Wüstenrot & Württembergische - DE0008051004

(I sold my RWE shares with about 6 percent profit last week, due to their dividend reduction. There are way more better companies, which pay about 4 percent dividend)

The ETF I also own is:
iShares STOXX Global Select Dividend 100 - DE000A0F5UH1

My next buys would be (if the price is low enough):

Hannover Rück SE - DE0008402215 and
Südzucker AG - DE0007297004


Fredrik von Oberhausen said...

Thanks for sharing Falk!

Good move to buy ETFs. Looking back on my own performance I should have done that also!

I will try to take a closer look on your companies in the weekend. Maybe one or two of them are still cheap!

With Hannover Rückversicherung I do not know if I would have bought Hannover or if I would have bought Talanx AG that owns 50.2% of the shares in Hannover. It would be very difficult for me to decide...

Fredrik von Oberhausen said...

Hi Falk,

I took a look at the companies this morning!

Data Modul looks interesting and I might analyse them one day.
Sanacorp has a company structure that I do not like since I usually want to own the mother company.
Wüstenrot also looked interesting but have an equity to book value similar to a highly leveraged bank and that scares me especially when it is a "smaller" company.
Hannover is excellent. I will make an analysis on that tomorrow because it is on the MDax, which I will start to analyse next anyway, and I want to compare it with MüRe which I own. It does however look expensive but we shall see...