|Shares Out. (in M):||0||P/E|
|Market Cap (in M):||550||P/FCF|
|Net Debt (in M):||0||EBIT||0||0|
The stock price of AOI is up almost 80% off the bottom earlier this year and is still trading at a significant discount to intrinsic value and it's nearest competitor. The company has $650mm of net debt and an equity cap of $550 for TEV of $1,200mm. The company is currently doing about $175mm of EBITDA,
Alliance One International (AOI) was created on
The timing of the acquisition (and attempt to tap the capital markets) in 2005 was awful. Brazil, one of the major producing areas, had a terrible crop and at the same time decided to increase taxes on the intrastate transport of tobacco (which was eventually overturned), and the Brazilian real appreciated in value, which increased their costs of production. Basically, everything that could have gone wrong did and the pricing of AOI's bonds reflected that in the marketplace. (Note: we own the bonds too and like the 11% senior notes and 12.75% senior sub notes, which are trading modestly over par with attractive yield(s) to maturity.)
Improving ROIC and Lowering Cost of Capital:
Since the merger, the company has been selling assets, reducing working capital, and using the proceeds to reduce debt. In fact, over the past two years the company has reduced net debt by $400mm. Although generating cash from working capital has largely run it's course, AOI has additional opportunities to reduce it's hard assets; the company probably has at least another $50mm of non-earning asset to sell and has announced a few of them in recent days. As far as the debt is concerned, the company has recently got an amendment to it's bank deal and it's A/R facility to repurchase it's 11% senior notes, which is a nice arbitrage given that its $300mm revolver is undrawn with a rate of LIBOR + 275 and the A/R facility has over $50mm, which was recently increased and the rate reduced to lower than that of the revolver.
Operating Expense Cost Improvement Potential:
AOI continues to work at reducing its operating expenses; EBITDA margins are 8.5% at AOI versus almost 12% for
|Entry||04/03/2008 06:43 PM|
|Are there any reasons to own this outside of valuation? Thanks.|
|Entry||04/04/2008 08:44 AM|
|Yes. As the company chips away at it's high-cost debt with asset sales and free-cash flow, you should get a migration of value from debt to the equity even with no multiple expansion. With a stabilization in the credit markets in the next year or so, we think the company can easily refi it's capital structure which will be a huge catalyst for the stock.|
|Subject||cheap as ever?|
|Entry||02/23/2010 11:00 PM|
was just revisiting this one and noticed it is materially cheaper than when first written up, with EBIT up significantly, the stock price comfortably lower, interest expense poised to really come down with additional deleveraging and a decline in the foreign borrowing line interest rates and industry volumes stable. Do you still follow it? Any thoughts on what may bring value out sooner? There is still minimal sell-side coverage but management doesn't seem too fussed about that. I guess the Japan Tobacco situation is the main overhang?
|Subject||RE: Author Exit Recommendation|
|Entry||08/25/2010 08:00 PM|
why do you recommend exiting AOI now? Are you concerned about UVV's comments?