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28 Nov

Swing Tip For Amira Nature Foods

by

Good afternoon!

Founded in 1915 and incorporated in 2012, Amira has evolved into a leading global provider of branded packaged specialty rice, including Basmati and other food products, with sales across five continents around the world. Amira primarily sells Basmati rice, which is a premium long-grain rice grown only in certain regions of the Indian sub-continent, under its flagship Amira brand as well as under other third party brands. Amira sells its products through a broad distribution network in both developed and emerging markets. 

The rational:

Amira faced some heavy headwinds in the last fiscal year which ended in March 2016. The lower volumes sold and the negative currency impact due to the international nature of their business, are considered temporarily by management. Morover, they were falsely accused in February 2015 of accounting fraud which this summer the court granted the motion to dismiss the action entirely.

They reinforced the message of focusing back on growth at their most recent earnings report: “We continue to maintain strong relationships with our major customers and now that we have reported our results for fiscal 2016 we look forward to returning to our growth model in 2017 and having a deeper engagement with our investors. Going forward, we continue to see many opportunities in India and around the world to further expand our business and create value for our shareholders.” (https://yhoo.it/2fttcjt)

More news tends to underwrite their message:

  • On 23 March, they announced that their Basmati rice products will be distributed via Cost Plus World market, a subsidiary of Bed Bath & Beyond Inc. The operate around 250 stores in over 30 states in the U.S. https://yhoo.it/2gyXQYl

This news succeeded the news of late 2015 when they announced that Amira branded products are available in Shaw’s Supermarkets, Inc. (“Shaw’s”)
http://bit.ly/2gCtpyi

  • This summer, together with United Phosphorus Limited (“UPL”), a leading crop protection and seed company, they have created a strategic alliance to build a productive rice value chain in India and other parts of the world. With this alliance they have a solid partnership from the seed until the rice consumption which is seen as a value towards farmers (allowing them to foresee seeds and guarantee offtake prices) https://yhoo.it/2gPfI1E

Earlier this year, they announced a strategic partnership with MAN Consumer, one of the fastest growing distribution companies in the United Arab Emirates. https://yhoo.it/2gAlyjq

The growth potential has been noted more and more by institutions resulting more hedge funds taking positions and financial institutions starting a coverage with nice price ratings e.g. “Jefferies Group started coverage on shares of Amira Nature Foods in a research note on Wednesday, September 21st. They issued a “buy” rating and a $13.00 price target for the company”. More can be found at http://bit.ly/2gyWhtA

Play:

We expect more news on distribution channels to hit the wire which should attract more institutional interest. Positive momentum could arise from now until the interim results in April ’17.

The current price range 7.7$-8$, provides an excellent entry level as the $7 area acted as support since May. Any news can drive this stock back into the $9 area, fueled by a potential short squeeze as 15% of the float is short and it would take them 29 days to cover these on the regular daily volume (short interest ratio), which is considered very long!

Be cautious however as this stock tends to have a high monthly volatility which leads to big P&L swings hence we must warn you to cautious regarding your positions size. However low volumes days give away no selling pressure is active.

Trade green!

Jason Bond

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2 Comments

  1. Dave J

    Jason are you still bullish on this one? Their results just came out and didn’t look so hot. Thanks.

    Reply
    • Jason Bond

      Yes, that’s a long term hold.

      Reply

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