quarta-feira, janeiro 25, 2012

F. Ramada (RAM PL)

F. Ramada Investimentos is the parent company of a group of companies that, together, develop two business activities:

i) industrial, which includes the activity of steels, from where it stands out the subsegment of steel for molds, and the activity of storage systems, and
ii) property, aimed at managing real estate assets in Portugal.

The activity of steels with a leading position in domestic market, is performed by two companies: F. Ramada Universal Steels and afire. Its clients are international big car manufacturers (like Autoeuropa from Volkswagen) who export almost its entire production.

The activity of Storage Systems is accomplished by four companies: F. Ramada Structures (the largest manufacturer of storage systems in Portugal, which concentrates all production of the group), Storax Equipements based in France, based in Storax Racking UK and Benelux Storax based in Belgium. International activity composes 76% of sales.

90% of total income from real estate assets in Portugal come from long-term rentals of forest land. Total investments are 85.8 million (M) euros, corresponding to leased land to third parties under operating leases, through contracts with an average duration of 20 years. There is about 70M euros of mortage loans related to these assets (info from Investor Relations). Net asset value of about 25.8M euros of these investments alone is far superior than the company's market cap (15.38M). Value per share is 1.01. And they are making an aditional 0.79M anualized net income return. But there's more. A lot more.

Industrial Unit

Sales growth of 25,9% in first 9 months of 2011 and net income for the last 4 quarters of 5.577M euros. A current PE of 2.76.

Lets look at Balance Sheet (3Q2011) without real estate assets and its associated liabilities:

Cash & Near Cash Items: 19.32
Accounts Receivable: 30.14
Inventories: 25.60
Other Current Assets: 10.00
Total Current Assets: 85.05
Net Fixed Assets: 4.93
Other Long Term Assets: 7.26
Total LT Assets (1): 12.19
Total Assets: 97.24
Accounts Payable: 15.01
Short-Term Borrowings: 43.77
Other ST Liabilities (2): 15.77
Total Liabilities (2): 74.55
Total Equity (3): 22.69

(1) Removing from LT Assets 85.81 of real estate assets.
(2) Removing from Other ST Liabilities and LT Borrowings about 60M euros of mortage loans related to real estate assets.
(3) Total Assets - Total Liabilities.

So we have an Industry Unit whose book value is about double the current market cap. Book value of unit is 0.885 and PB is 0.68. Current ROE of 25.45%.


Having in mind that this is a microcap but also that it is currently very profitable and that its balance sheet is simple and also strong, I think that book value is a conservative enough valuation.

Real estate assets: 1.01
Industrial Unit: 0.88
Value per share: 1.89, or a 215% potencial from current price of 0.60.


- The industrial unit is evidently tied to the economic cycle. But I should add than even in dificult years of 2008 and 2009 the company was profitable with earning of 2.723M and 1.850M euros.

- The risk of Portugal leaving the EU. It is in the interest of the euro zone and of the leading countries (Germany and France), that these solvency issues by several country members are resolved soon and their economies recover. That would allow the leading countries to strengthen their growth and protect their financial sector as its institutions were the ones that lent money to Greece, Ireland, Portugal and Spain.

Portugal has already a restructuring program designed to reduced budget deficits and total debt as well as to make the economy more flexible and increase productivity, concentrating on export activities.

The program was designed by the EU, ECB and IMF to bailout the country after it could not finance itself. Portugal will have a couple of years with slow GDP, but structural changes being made will reduce the government involvement in the economy and reduce unproductive businesses activities like building and construction. Odds are the country will eventually emerge stronger.

Portugal did not have a recent housing bubble like UK or Ireland. It also doesn’t have has much public debt as Greece, Italy or Belgium. Hence, the Portuguese problem rests on competitive issues that are being address.

We think the risks of Portugal leaving the euro are low. Ultimately if it did happen, the margin of safety of the ideas presented is so huge that it would protect the investment even in that worst case scenario.


Current dividend is 0.07 cents or a 11.67% dividend yield. Payout Ratio is 32.26%.


F. Ramada Investimentos is majorly owned by its managers (+40%). Bestiver Gestion, the great spanish value investors, own 8.92% of the company.

Hugo Roque

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