Wednesday, June 17, 2015

Analysis of Avtovaz


Avtovaz, a Russian automotive company

Company: Avtovaz

ISIN US05453R1014 | WKN 576848  

Business: A Russian automotive company. They are the biggest personal car producer in Russia with their own brand, Lada, as well as having production for, for instance, Renault and Nissan.

Active: In 46 countries with the biggest market being Russia.

P/E: -1.0


contrarian values of P/E, P/B, ROE as well as dividend for Avtovaz

The P/E is due to losses bad with -1.0 but the P/B is looking very good with 0.7. Still due to the negative result we get a no go from Graham. Earnings to sales and ROE makes not sense due to loss and the book to debt ratio is low with 0.3. For car companies this is not so strange but usually companies in the east have very little debt so here I find it pretty extreme.
In the last five years they have had a yearly revenue growth rate of 6.7% which is excellent! This then gives us a motivated P/E of 17 to 22 which means that Avtovaz is most likely undervalued on the market today.
They pay no dividends which is bad.

Conclusion: Graham says no and if it would not have been for my confidence in the CEO then I would also have said no to Avtovaz because they are bleeding, making losses and besides from P/B everything is looking bad. I will remain as a shareholder in Avtovaz but would never recommend anyone to make an investment. In that case go for Renault or Nissan instead that own 51% of Avtovaz.

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2 comments:

Riskminimeraren said...

Happy to be able to contribute to your investment ideas! But given the interview, this is really a turnaround case in a far from transparent economy. But I guess if Andersson gets this right the stock return is going to be great!

Fredrik von Oberhausen said...

Hey Riskminimeraren!

Yes, it is a difficult turnaround in a difficult economy but with a serious CEO, with experience working in Russia and the most crucial politicians backing him up which they did not do when he took over GAZ. Back then they all hated him in the beginning.

I have already added a note in my calendar when to step in and buy shares in Russia Railway that Andersson wanted to take over after Avtovaz.

Enjoy your summer vacation in Sweden and thanks for the heads-up on Andersson!