Amira Nature Foods Ltd. (NYSE:ANFI) had a rough 2015. It began last year trading at 13.61/share but then faced a series of fraud allegations from Prescience Point. This baseless short-seller attack hurt investor confidence in the company and its share price fell all the way down to $2.72/share in intraday trading on August 21st. Although its share price has recovered some since the short-seller allegations were officially debunked, its share price has fallen to a little over $8/share after a sell-off alongside the broader market last week.
This sell-off presents long-term investors with an excellent entry opportunity for a high-growth stock in a niche market. Although the stock has been volatile in recent weeks in anticipation of fully-audited financials, there is little doubt that Amira Nature Foods continues to grow and remains undervalued.
A Value Buy
Amira Nature Foods is a specialty rice company from India whose products are sold in 40 countries around the world. It has been rapidly expanding over the course of 2015, with growth into the US market through an expansion into Whole Foods and in Shaw's Supermarkets. ANFI's main product is basmati rice and, according to its chairman Karan Chanana, demand for basmati rice has seen a CAGR of 12-15% over the last 15-20 years. As demand for basmati rice continues to grow, this will help sustain demand for ANFI's top product and push growth. ANFI has already demonstrated rapid growth and has seen its revenues jump from $203 million in 2010 to $547 million in 2014.
In recent weeks, there have been several positive developments with Amira Nature Foods.
The best piece of news came on December 23, 2015 when ANFI filed a 6-K noting two important points. First, that "its independent auditors, ASA & Associates LLP ("ASA") have substantially completed the audit of the Company's financial results for the fiscal year ended March 31, 2015..." What this means is that these completed financials - along with reaudited financials from previous years - will be released shortly. Even more important is the second point made, which noted that ASA "has not notified the Company of any material changes to the results compared to what was previously released by the Company on July 16, 2015." What this means is that the press release from July 16, 2015 is essentially what investors will find out from ANFI's audited financials for FY 2015. According to that press release:
FY 2015 Financial Highlights versus FY 2014:
- Revenue grew 27.8% to $699.4 million compared to $547.3 million
- Adjusted EBITDA increased 31.9% to $99.5 million compared to $75.5 million
- Adjusted EBITDA margin of 14.2%
- Adjusted profits after tax was $54.3 million compared to $41.0 million
- Adjusted earnings per share ("EPS") was $1.51 compared to $1.14
This demonstrates ANFI's profitability and strong growth. With revenues of nearly $700 million and EPS of $1.51, it becomes eminently clear that ANFI is undervalued at its current price of $8.05/share.
Another positive development is that on December 30, 2015, ANFI filed another 6-K 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 is positive for two reasons. First is the fact that it signed a major contract and that this contract is with a repeat buyer. The second positive takeaway is that this represents ANFI's commitment to continue growing its international footprint.
Amira Nature Foods' stock price has been held down for the past several months because it has yet to release audited financials. Although its share price will likely remain volatile until fully audited financials are released, we already know what the results for FY 2015 will be. Based on those results, we can see that ANFI performed well and continues to grow. With that being said, investors still need to learn more about its recent financial history to measure the overall health of the company.
But given its international expansion in 2015, its excellent performance in FY 2015, and overall growth, it appears that ANFI is setting itself up for sustained profitability and growth. Long-term value investors should buy and hold Amira Nature Foods while it still remains undervalued.
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.