Atento Could Be Sold In The Near Future

Summary

• ATTO is a smaller stock with a tight float.
• The majority of the company is held by three debt-focused private equity funds that have been involved in the company for years.
• That combination makes ATTO ripe for a sale, and a sale could come at a big premium.
• Even without a sale, ATTO is experiencing a lot of business momentum, and shares look cheap.

shulz/E+ via Getty Images

It's been a rocky ride for Atento (ATTO). Carved out of Telefonica (TEF) over a decade ago, the company has struggled with a massive debt burden and poor growth.

However, in 2019, new management was brought in to turn the company around. They gave the market targets for both organic growth and margin improvement, and they've more than delivered on those targets.

Despite a strong recent run in the stock, the company remains cheap. Leo Kang from Plum Capital thinks the stock is much too cheap, and that the alignment of that controlling shareholders suggests a sale is likely in the near to medium term. In addition, he thinks the market is underestimating the margin and growth potential of the business, while far overweighting the near term risk of a key customer's contract expiring.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Comments

[bazooooka]

Might add some more in low twenties.

[deadhead213]

Same there’s no volume to really move this

[Safety in Numbers]

@deadhead213 Just takes one big or lots of small buyers to move it a lot. Worked for AMC and GME, with ATTO at least it trades well below intrinsic value.

As soon as the stock is above $30, I assume it's in play given the proximity of a 50% premium to the ACB for the large shareholders HPS, GIC and Farallon

[bazooooka]

Going good.

[Safety in Numbers]

Thanks for the article and the podcast.

I have been bullish and vocal on $ATTO for some time but the risk/reward has never been better. Lots of catalysts lining up over the next 6-8 weeks with earnings which will easily beat current consensus and an investor day in which there is a good shot they introduce new guidance well above the street for 2023.

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[GroVal Capital]

@Safety in Numbers - I also expect good earnings and a good plan on investor day. Been nice so far, but still way undervalued IMHO. Fortunately, the underlying fundamentals have continued to improve. Growing EBITDA, margins, the more profitable business lines and the hard currency revenues. Currency is holding ok and not the headwind it has been - hope that keeps up. Thanks for sharing all your work on this one Safety.

[GroVal Capital]

@GroVal Capital I'll add, I don't think that ATTO deserves the large multiple discount it is getting to peers. With the improving debt ratio and EBITDA margins, I think the company deserves more of a multiple re-rate. More true as the company continues to improve. As Plum notes in the podcast, current management has changed the trajectory of the company from the underperforming operations of the past.

[Safety in Numbers]

@GroVal Capital Thanks for your articles on this one too!

ATTO is up 34% since this one back in March and that is likely just the start.

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