Earlier this month, I wrote a piece encouraging investors to consider Amira Nature Foods Ltd. (NYSE:ANFI). Today's 20-F and 6-K provide encouraging signs of a company thriving under challenging circumstances. Taking a deeper look at recent events, the current state of the company, and things to look forward to in 2016 provides some evidence for the direction of the company. In addition, the authorization of a share repurchase plan provides additional evidence that the management team will support long-term investors. Although ANFI jumped in early morning trading to above $11/share, it remains undervalued and is still a long-term, value investment.
20-F and 6-K
The big news today is the release of the fully audited FY 2015 financials. These confirm much of what investors were already expecting. As per the 6-K, we can see healthy profits and revenue growth:
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With revenues of $700 million and nearly $100 million in adjusted EBITDA, it is clear that Amira Nature Foods is doing well. But what really caught my eye is the statement that:
Separately, the Company announced that its Board of Directors has authorized the implementation of an opportunistic share buyback program, which may be updated from time to time. Any share repurchases will take place in open market transactions or in privately negotiated transactions and may be made from time to time depending on market conditions, share price, trading volume and other factors. Such repurchases will be made at the Company's discretion and in accordance with all applicable securities laws and regulations. Although there can be no guarantees on how much, if any shares are ultimately repurchased. [emphasis added]
This is fantastic news for long-term investors in the company. What this means is that ANFI will repurchase shares in the open market to support its share price if and when it becomes necessary. With its share price currently hovering around $11 and a still extremely low P/E ratio of just under 8, there appears to be low downside risk for long-term investors at this level. In addition, short-sellers will not be able to keep its share price deflated now that ANFI has authorized this open-ended share repurchase plan to help support its share price.
Although the news from today is fantastic, it is important to contextualize Amira Nature Foods to provide long-term investors with a full-understanding of the company.
Last year was a challenging year for Amira Nature Foods because of the short-seller attack launched by Prescience Point. Prescience Point launched a short-seller attack against Amira Nature Foods on February 9, 2015. This was the most inconvenient time possible for ANFI, because this is when a $225 million bond deal was supposed to close. Because of the attack, the bond deal was postponed and ANFI's share price took a precipitous plunge. Later on, the release of full year audited financials were delayed in response to the attack. Then Prescience Point came out with another attack piece at the end of July. In August, ANFI switched auditors from Deloitte Haskins & Sells LLP to ASA & Associates LLP. All of this events shook investor confidence and hurt ANFI's image.
But in November, Amira Nature Foods started to receive a reprieve. An independent third party investigation found that the fraud allegations leveled against ANFI are baseless. At the same time, a series of contracts were announced that demonstrated its expansion in the US market through a deal with Whole Foods and a deal with Shaw's Supermarkets. Towards the end of December, a 6-K noted that the earlier FY 2015 data released by ANFI is accurate and that fully audited financials will be released soon.
Clearly Amira Nature Foods had a rough year. But what we know based on the current financials is that it continues to grow and improve. In addition, we know that the company has survived a baseless attack. Going into 2016, investors will learn a great deal about the current state of the company over the next few months.
Current State of the Company
There are several questions that long-term investors in ANFI want to learn more about to fairly evaluate the current state of the company.
The most pressing concern has now been resolved, which is the release of up-to-date financials. But now investors will be looking forward to seeing how the company's FY 16 financials look. It is likely we will learn more about the current financial state of the company in the coming weeks and months ahead.
Another question some investors have is why did ANFI switch auditors from Deloitte to ASA? Although one can speculate as to the cause, it is important to recognize that ASA is a strong, independent auditing firm in India. Having a strong, independent local firm auditing its financials appears to make the most sense for ANFI.
Another question about ANFI is about the size and scope of the contracts it has recently entered into. On December 30, 2015 a 6-K was filed that announced it had "entered into a $92 million contract to supply third party branded basmati rice to a key repeat customer in the Europe, Middle East, and Africa ("EMEA") region." This follows up a similar 6-K filed at the beginning of 2015. The key takeaway from these filings are that ANFI will file notices whenever large business transactions are conducted. Although little is known about the specific details of these contracts, it is encouraging to note that ANFI will notify investors whenever major contracts like these are signed.
Turning towards ANFI's long-term outlook, there are three salient points to consider related to growth, macroeconomic issues, and the company's leadership.
The first is what type of growth investors should expect from ANFI going forward. With over 20% CAGR since becoming a publicly traded company, investors are hoping to continue to see strong growth. However, given the events of a tumultuous 2015, growth may be slower than it has been in previous years. Although there have been positive announcements about new contracts, investors will not be able to objectively evaluate ANFI's longer-term trajectory until additional financial data is released in the weeks and months ahead.
The next points are related to broader macroeconomic factors. Since the majority of ANFI's revenue comes from sales of basmati rice, one concern is about the impact of the falling price of basmati rice on ANFI's bottom line. Although this may have some impact on revenues in the short term, demand for basmati rice continues to grow internationally. For example, demand for basmati rice has recently increased in Iran as sanctions in that country have been lifted.
Another macroeconomic factor to consider is the price of oil. For ANFI, low oil prices help in some of its markets, while it does not help in other markets. Ultimately, low oil prices will not have a significant impact on its bottom line.
The final aspect to consider is leadership. At the top of the company is ANFI's chairman and CEO, Karan Chanana. He is a competent leader who has opened his family's business to the international market. He is committed to the long-term health of the company and it does not appear that he has sold any of his shares several years ago when ANFI was trading in the 20s. The other key member of the management team is Bruce Wacha. He is an honest, self-deprecating leader who appears committed to improving ANFI's long-term outlook. The company's leadership is solid and continues working hard to improve its business in spite of the various setbacks in 2015. They are staying for the long-term and remain committed to helping build this company. The company is in good hands and strong leadership is critical to the success of any company.
Long-term investors in Amira Nature Foods have already begun to have their patience rewarded in 2016. Although ANFI had a tumultuous 2015, its leadership team is working hard to ensure the long-term viability and strength of the company. With fully audited financials now available and a superb share repurchase plan in place, investors can look towards a significantly better 2016. Based on the already extant data, we can see that ANFI is a growing company with a good product and it continues to post healthy profits. Amira Nature Foods remains a value buy for the long-term, value investor.
Disclosure: I am/we are long ANFI.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.