Analysis of Kurzemes

Company: Kurzemes

ISIN LV0000100949 | WKN A0M21D

Business: A Latvian animal company. They stand on mainly three pillars: Bulls (breeding and semen production), Boars (breeding and semen production) and finally Insemination Stations (main revenue from cow insemination).

Active: As of yet only in Latvia but are cooperating with the entire Europe.

P/E: 10.4

Comment: This company is too small for me but I found it charming to read that they explicit write in the annual report that they had to buy a new car and how much that costed them. Still due to that it is so small one can actually become a larger shareholder which I find funny and secondly these breeding and insemination "companies" are all over Europe but in most countries they are not on the stock market but are owned by the farmers themselves. In Kurzemes the Latvian farmers own only 37.25%.

The P/E of Kurzemes is great with 10.4 and the P/B is excellent with 0.7 which gives a very clear go from Graham (I guess he would not have liked the size though). The earnings per share is fully ok with 10% but the ROE is no good at all with only 6.6% which comes from high equity and low debt as can be seen with the insane book to debt ratio of 13.8! Crazy!
In the last five years they have yearly had a revenue growth of 3.45% which is ok and this then gives us a motivated P/E of 12 to 15 which means that Kurzemes is slightly undervalued on the market today.
They pay a very nice dividend of 4.6% which represents 48% of their earnings so with remained earnings it should be possible for them to keep that up. Looking at the last Q3 report then they have had a bad year in 2014 so let us see if they can keep the dividends up.

Conclusion: Graham said yes and I find it too small even though the P/E, P/B and dividends are all excellent not to mention the book to debt ratio that are insane. It was funny to play with the thought of stepping into such a small company!

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