Iamporpla
Dear Readers/Subscribers,
We will update on K S here (OTCQX: KPLUY). The company, which in the past was known as Kali Und Salz GMBH, is a fertilizer company founded in Hesse; In fact, it is the main European supplier of such products today. The company also has some other benefits that we are going to take a look at this article. This company is a 133-year-old industry giant, and we’re going to take a look at the benefits it can bring to investors right now.
If you don’t forget my last article about the company, because it’s not that unusual as a company to cover, K S is a chemical company founded in 1889. The company, in its history, has also been a major player in potash. . as a salt player. This is also where the company is located today. It even has a component of the BASF inheritance (OTCQX:BASFY), which once had a potash division.
As mentioned, the company is through the largest European supplier of potash, and is also the largest salt producer in the world. It merged with Morton about a year ago and now “owns” a share of the market.
At a higher level, and why the company is so attractive, it is because the company is a fully vertically incorporated manufacturer of rock salt and potash, covering the entire chain from A to Z. She explores and does everything for S
IR K S (IR K S)
In addition to the existing assets, the company owns the mining rights to more than one billion tons of potash that still exist in Germany, as well as 1. 5 billion tons of uncooked salt. The other resources outside Germany are just as large and are located in North America. In addition to Morton, the company acquired a smaller potash company after the crisis for 300 million euros.
Globally in terms of potash, K S is the fourth largest behind Canpotex (Nutrien/Mosaic), Belarus BPC, a former Soviet-era potash producer, although it is not known what the existing macro does, and Russia’s Uralkali (Source: AlphaValue). Again, however, when you take a look at anything coming from Russia or Belarus today, you literally have to look at the price or exports that those corporations can actually bring to market today, due to sanctions and ongoing situations.
K S doesn’t have a credit score yet: it has a B rating due to all mergers, acquisitions and issuances, but that doesn’t reflect its low debt, which doesn’t more than double.
At a higher level, K S lately enjoys excessive profitability due to the underlying costs of agriculture-related raw materials.
IR K S (IR K S)
Sharp increases in cultivation costs that increase existing input costs, of which potash accounts for no more than 5%, and result in fair flows for the firm. For the period 9M22, the company’s turnover is more than twice that of 9M21, the sales volume is more or less the same in terms of gross product, which shows how well K S has controlled to increase sales costs.
EBITDA is no joke. Take a look.
IR K S (IR K S)
Although they are just charges and increases in entry charges are not a joke, they are very clever trends and create what is the underlying existing truth for the company that forms, no matter how it is cut, a very positive 2022E. The company’s existing EBITDA of 9M22 already exceeds the most productive EBITDA ever recorded in 2008.
And there is a fourth left.
Global potash materials are declining due to macro, and even with positive and positive scenarios, global potash materials will not do so until 2026E. And that includes a y for Russia and Belarus from 2022E.
K S is still a very “German” company, as 60% of the company’s shareholders are German and about 20% in the United States. 55% of the company’s shareholding comes from institutional investors. This makes it an “inactive” selection outside Germany, and there are reasons for its appeal abroad. Dividend yield, or lack thereof, is ultimately indeed one of the reasons.
IR K S (IR K S)
It also means that the company is “fair” agricultural, it is not. K S manages two divisions in its business, and those are neither geographic nor product-based, but based on the final product. Agriculture accounts for 46% of salesand industry with 3 sub-segments. Agriculture has the world’s production of potassium chloride and specialty fertilizer business. Industrial activities include sales of chlorinated alkaline processes and isocyanates, as well as sales of agri-food products and sales of animal feed (such as feed/lickstones). The company also has a waste control partnership through REKS, a joint venture between KS and Remodis REMEX. The combination of those segments creates cyclical appeal for what the company does, at least in theory.
Salts and potash go nowhere. Indeed, with the continuation of the war and sanctions in the East, the potash markets of Belarus and Russia have become incredibly difficult. This is also why we will see companies bouncing like a rubber bullet, as we will see in the evaluation. It is doubtful that such disruptions will occur in the very near future, which will give this company an advantage. That’s why I’m also surprised that we haven’t seen an even bigger overall advantage for K S than we saw.
IR K S (IR K S)
Going forward, K S expects continued innovations in EBITDA and sales, offsetting charge inflation and logistics issues worldwide.
The company has recently and especially increased its garage and pond capacity, allowing it, if necessary, to wait for things to be on the loading side before promoting if necessary.
And as mentioned, until 2026E, we won’t see any innovation on the source side, meaning K S can probably keep costs high/high.
The dangers are there, of course. Everything similar to farming is a volatile place. I know, I’ve invested in the region for years. There are ups and downs, and the most productive time to “get in” is when dominance is crushed by the market. Although we sometimes have a reasonable valuation, this is not the result of strong market tension, but of a bullish outlook due to increases in commodity prices.
Although the products/services provided through the company are a must for life (they allow you to grow food), they are not as undeniable as you would expect. I have been to 3 other mines in two countries, and the operations are not clean, undeniable or cheap. The company wants significant investments in mining capacity, not only in equipment and machinery, but also in automation. Therefore, CapEx is also a fear for the future. Anti-ESG arguments for the company’s operations also make the salt sector larger, where road salt pollutes groundwater, kills wildlife and is considered a major challenge in some areas.
So some of the effects before making an investment in K S.
Let’s take a look at the valuation of the company.
Let’s put it simply. If we assume that the company has a net ebook of 6. 2 billion euros and with the corresponding recoverable amount of revenue, adding what is owed to the company’s new Werra site, then the percentage value of the company should, technically, be double what we see here. This day.
IR K S (IR K S)
Of course, it’s not that simple. K S is notoriously volatile and a company that rises and falls, with long periods of very bad business trends. From 2016 to COVID-19, the company provided a negative RoR, only since COVID-19 that the company has been able to buck the trend, and those valuation spikes seem inherent in the way stocks are traded.
The right time to pick it up is reasonable, which I didn’t do with my initial actions.
However, at the existing levels, I believe that society, for the existing macro and where it is headed, is particularly undervalued. Dividends explain why you invest in the company, at least that’s not the main explanation for why. There will be dividends for K S here and hot dividends in the context, however, valuation is actually why it deserves to opt for the company.
Analysts are slowly becoming aware of what other people lack here. A year ago, the PT was €13/share; today it is more than double, with 15 analysts averaging around €27. 14, and nine of them with a score of “BUY” or equivalent, looking like an increase of almost 30% cautiously. And if you look at the fair value calculation above, see how conservative it still is.
While K S can simply capture the market share of its eastern counterparts, it limited sales expansion to 3. 5-4% with an EBITDA expansion rate of 1. 5-2% in peripheral periods with a strong CapEx-to-sales ratio in the coming years. In a WACC of around 8% with a debt load of less than 6%, the company, at a long-term regulatory expansion rate of 3%, adjusted upwards since my last article, gives us a value diversity target of €19. 8-24. 5/percent.
The explanation for why K S trades at those multiples today is not that other people think this rate of expansion is indicative of the long run, but the current fertilizer situation.
K S has been a reasonable company in terms of multiples, due to the last few years of weakness. Its peers include Yara International (OTCPK:YARIY), Wacker (OTC:WKCMF), Symrise (OTCPK:SYIEY) and, to some extent, BASF. Compared with those chemical corporations and this organization of competitors, the company is really undervalued, even with a 10-15% discount, which would apply at all levels due to the weak fundamentals of the company.
The company, given its reporting structure, is undeniable to trade at the NAV level. All you want is which multiple to use. I use a diversity of 9-10X EV/EBITDA, which, net of debt and liabilities, provides a price/percentage of the asset between €23 and €26. 6 – closer to the company’s existing percentage price.
So you see how I end up achieving my purpose of at least € 26. 5 consistent with the consistent percentage where I see that K S is valued here.
K S has just introduced a new dividend policy, with a basis of at least €0. 15/share consistent with the year, plus a discretionary premium over consistent annual compliance. This transforms, finally, this boring payer into a reliable dividend company. its direction for FY22, expecting more than €800 million in adjusted loose cash flow, paving the way for a positive 2022.
For this reason, it is my thesis on K S.
Remember, I mean:
These are my criteria and how the company meets them (in italics).
The corporate discussed in this article is only a prospective investment in the sector. iREIT members at Alpha have access to investment concepts with particularly higher/better returns than this. Remember to subscribe and stay informed here.
This article written by
36-year-old DGI investor/senior personal portfolio control analyst for several clients in Sweden. It invests in the United States, Canada, Germany, Scandinavia, France, the United Kingdom and BeNeLux. actions and be an authority on price investments as well as similar issues.
I am an iREIT contributor at Alpha as Dividend Kings here at Seeking Alpha and work as a senior research analyst for Wide Moat Research LLC.
Disclosure: I have/have a long advantageous position in the shares of BASFY, YARIY, KPLUY, whether through ownership of shares, features or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.
Additional Disclosure: While this article may sound like money advice, please note that the writer is not a CFA or otherwise written to give money advice. It would possibly be structured as such, but it is not money advice. Investors are required and expected to carry out their own due diligence and research prior to any investment. Short-term trading, feature trading/making an investment, and futures trading are potentially incredibly dangerous styles of investing. Sometimes they are not suitable for someone with limited capital, limited investment experience, or lack of understanding of mandatory threat tolerance. I own European/Scandinavian tickers (not ADR) for all European/Scandinavian corporations indexed in my articles. I own the Canadian symbols of all Canadian stocks I write about. Please note that making an investment in European/non-US stocks carries express threats of withholding tax to the company’s domicile as well as its non-public circumstances. Investors deserve to consult a tax professional about the general effect of dividend withholding taxes and tactics to mitigate them.