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Amira Foods: Bet on Basmati
10/02/2013 7:00 am EST
Our latest featured stock is an industry leader in the market for Basmati rice, a premium long-grain rice grown only in certain regions of the Indian subcontinent, primarily in the foothills of the Himalayas, notes Tom Bishop, editor of BI Research.
Amira Foods (ANFI) was founded in 1915 and has evolved into a leading global provider of packaged Indian specialty rice.
Its fourth generation leadership is helmed by the energetic, strategic chairman and CEO, Karan Chanana, who is also well-spoken in English.
He grew up in the family business but is bringing modern business technologies to it, leveraging nearly a century of experience to take the Amira brand global in recent years.
In addition to Basmati rice, the company recently launched new lines of Amira branded products, such as ready-to-eat snacks, and an organic line, to complement its packaged rice offering.
The company is headquartered in Dubai, United Arab Emirates with other offices in India, Malaysia, Singapore, the UK and the US.
In India, the middle class is rapidly growing, and Basmati rice consumption with it. The company is in 40 countries now, and plans to expand to 70 by 2017.
Recently, it entered the South Korean market, as well as the UK, and also has made a small toe-hold in the US; their Basmati rice product is just starting to roll out in the US and so far is in 163 of 449 Costco's.
Amira went public via an IPO in the US in October 2012, selling nine million shares at a price of $10, and netting about $81 million.
The company doubled production capacity back in 2010 and is using these proceeds, in part, to double production capacity again, with most of the balance going to reduce borrowings on its credit line.
Note, Basmati rice, a premium rice, actually has to be aged for about 12 months before it is sold, so there is inventory to fund. The capacity expansion should be finished next year.
The stock has a PE to growth rate ratio well less than one, and has beaten guidance in three of the past four quarters by at least 30%; the most recent beat was by 110%, and estimates for this year and next are rising.
Consider that the rice business (at wholesale) is about $240 billion worldwide, of which $40 billion is in India and of that, about $6 billion is Basmati rice...of which Amira has about 7-8%.
Also, keep in mind that nearly a century of good relations with its rice farmers creates a barrier to entry/growth by competitors. Three of the four analysts following the stock rate it a Strong Buy with one at a Buy rating. I consider ANFI an excellent Buy up to $14.
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