Tag Archives: 4-star

Sugar and Ethanol Producer? Cosan is much more than that nowadays!

Cosan’s most known business is indeed Ethanol and Sugar production. That’s how the company started and they are still the largest producer in Brazil and a major player worldwide. However, due to volatility in these commodities’ prices, Cosan’s management has been diversifying its activities in the last few years and now half of it’s EBITDA comes from other businesses.

Cosan today operates on production, transportation and distribution of renewable energy sources. They prospect land, grow and process sugarcane, distribute fuels, transport and sell sugar on the domestic and international markets and produce and sells lubrificants. It is the world’s first vertically integrated bioenergy company. The below image, shows the different parts of the company:

Cosan Group

 

In the fiscal year ending in March, 31st, 2013, the company reported only 20% of its EBITDA from Raízen Combustíveis, the traditional Sugar and Ethanol business. Revenue and EBITDA were distributed as follows:

Cosan Numbers 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Business above is composed of manufacturing and distribution activities for the Mobil and Comma brands, base oil distribution and the corporate structure of Cosan, except Raízen.

Exchange rate was around BRL 2 for US$ 1 at the end of FY2013.

Cosan Ltd.

The diversified and vertical business model adopted by Cosan provides a much more stable operating environment. Furthermore, Cosan operates with renewable energy and presentes several areas for growth in the next decade or two. Overall, the company deserves a 4-star EBI Rating.

ADR Ticker CZZ
Bovespa Ticker CSAN3, CZLT33
Investor Relations Website http://ri.cosan.com.br/Default.aspx?linguagem=en
Industry* Renewable Energy
EBI Rating 4-star

Santander Brasil: Decent Investment with potential mid-term upside

Santander is the fourth-largest bank in Brazil. Unlike in most developed countries where small banks and credit unions are always present, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have around 70% of the market share together. This oligopoly, along with the high switching-cost in the bank industry, gives these 4 banks a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Santander Brasil has around $200 Billion in assets and 2,000 branches. While it still does not have the profitability shown by Banco do Brasil, Itau Unibanco and Bradesco; Santander’s forecast is to grow its credit portfolio faster than the competition in the next years and reach that level of profitability. Because that profitability is currently not built into the stock price, if they really deliver what they are promissing, the stock will adjust considerably in the next years. That has proven to be hard to achieve in the recent years though.

Easy Brazil Investing Rating

Santander benefits from the banking industry fundamentals in Brazil that is very favorable with high switching-cost, oligopoly, conservative regulation and high spreads.

These factors along with the exposure to a fast-growing market, gives Santander a solid investment case which receives the 4 stars EBI Rating. In the banking industry, Itau Unibanco and Bradesco still has a better rating due to their higher profitability and larger scale.

Banco Santander Brasil S.A.

ADR Ticker BSBR
Bovespa Ticker SANB11, SANB3, SANB4
Investor Relations Website http://www.ri.santander.com.br/Default.aspx
Industry* Banks, Insurance
EBI Rating 4-star