Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

some yellow flags for AGRO

|Includes:Adecoagro S.A. (AGRO)

1. Valuation
Be careful if earnings consist of valuation and the cash flow is negative. Q3 EPS, which fall short 50% of the estimations, include such an valuation increase:

Adecoagro's land portfolio has increased to 295,801 hectares As of September 30, 2011, Cushman & Wakefield updated its independent appraisal of Adecoagro's farmland. Adecoagro's farms were valued at $899.1 million, 115.5 million higher than C&W's previous appraisal. This value creation mainly reflects Adecoagro's focus on land transformation and soil productivity improvement through its sustainable production model.

I do not say, this is the next Chaoda or the next Sino Forest. And it is to concede, that the story of upgrading the value is plausible. Further they sell from time to time a piece of land, and the last transaction led to higher realized gains than book value. So it is definitely no red flag, but a yellow stained green flag or a green stained yellow flag

2. Assets raise but liabilities raise stronger
Total assets were up 49 million USD from 2009 to 2010, but total liabilities grew by 83 million USD. No big difference, but look at the long term development of the balance sheet. 

3. A young company with a good story
On the one hand long term investment of course require a convincing business model. But if this story is too good, then one shoul be careful. Especially if it is a young company and the money collected from IPO is turned to the former owners. I have not checked out this already.
On the one hand I am attracted be the growth story of AGRO's business model, but I will not invest before a careful due diligence.
Stocks: AGRO