Ukrproduct Share Discussion Threads

[aleman] 04/1/2014 00:12

As Aleman notes, the shares are very cheap, but there is no obvious reason to own them until Ukraine's economic and political situation is sorted out.

I would say that's an excellent reason to buy/hold shares. I made lots of money from buying shares in the depths of the financial crisis when others wanted to wait to see the situation resolved, but that left them to buy at higher prices when they looked safer. You can't get them all right but the best money is made buying when everyone else is panic-selling, not that there seems to have been much of that here with the shares closing up today.

With such wild gyrations in margins, there needs to be some economic stability to enable a proper assessment of the company's prospects.

That's a bit of a cop-out. Shareholders here have to assess value now without waiting for political relations between Russia and Ukraine to settle. We can't just pretend we're not here. The shares are trading so how do we assess value and compare that to the price in the market? If you bought shares at today's price and the company liquidated tomorrow, you would likely make a profit since it trades at a 78% discount to NAV and a 76% discount to NAV ex-intangibles. I could see this company getting into difficulties that threatened its existence but I could also see it recovering margins and growing turnover to take the shares over £1 in a relatively short period if they get it right. I think a 90% discount to the potential upside, which I also consider more likely, is probably sufficient to account for the political risk. (In my experience, shares exposed to political risk tend to have it overplayed and risks are often underplayed at companies where you thought there weren't any! There are unknowns we know but then there are unknowns we don't know!) I accept I could lose everything but I think the shares are still undervalued at such a big discount - to both NAV and potential earnings - and might even consider buying more at this price, despite a likely (small?) reported loss this year.

I think they're enticingly cheap but your perception of political risk will be different from mine. The question for me is how much of my portfolio am I prepared to risk. I think they're cheap but I'm not sure I want to buy more until I see if results are in line with my expectations and how politics, trading and weather go between now and then.

I think the weather will have lifted Ukrainian milk prices last year. The grass growing season must have been poor in 2013. Last winter was long and cold (the unusually cold Feb-April period was when the price rose) ; summer was hot, dry and short I think as this winter started early in Eastern Europe. It will have done milk cows no favours. Average weather next year could see lower milk prices, if political effects were to turn out neutral.

I don't wish to sound arrogant or ungrateful, though. Thanks for your views on political risk and the link to trade data. More of the same will be welcome.

Here's one I found interesting:

hxxp://apps.fas.usda.gov/psdonline/circulars/Dairy.pdf

[valhamos] 03/1/2014 21:19

The ever-changing political situation and its impact on Ukraine's trade relationship with Russia is not helping.

It was only last year that restrictions on hard cheese exports to Russia had led to the availability of higher milk volumes. This has reversed this year with consequent raw milk price rises driving packaged butter gross profit down by a half and total gross profit on branded sales down by a third (or approx. £2.5m).

With such wild gyrations in margins, there needs to be some economic stability to enable a proper assessment of the company's prospects.

Useful information on Ukraine's dairy sector:

gain.fas.usda.gov/Recent GAIN Publications/Dairy and Products Annual_Kiev_Ukraine_10-22-2013.pdf

[mirako] 03/1/2014 19:01

As Aleman notes, the shares are very cheap, but there is no obvious reason to own them until Ukraine's economic and political situation is sorted out.

A further concern is the tendency of small emerging market stocks to delist from London after a run of losses and low valuation. There's no particular reason to expect that here but it makes for a bad dynamic: fear of delisting can discourage buyers, which in turn increases the chance of delisting, and the stock gets stuck in a negative equilibrium.

[aleman] 03/1/2014 16:14

Thanks, jhan. Good luck to everyone. We may need it.

Beware that the update portends a possible pretax loss for the year (although still probably cash generating), as I make gross profit falling from £9m to around £7m on today's update, before a touted recovery in 2014. The shares rose a touch because they are already ridiculously cheap. There are £19m of assets if you ignore £1.2m of intangibles yet the market cap is only £4.45m. (Granted receivables are a big chunk at £7.4m.) If it can restore margins, it could multibag as it shouldn't be this cheap in the first place, although failing to meet expectations of recovery is becoming a recurring theme which needs to stop.

[mach100] 03/1/2014 15:38

I didn't like the look of today's results but there was a slight tick-up early doors so what do I know? Looked like a lot of negatives in there to me so not for me at these levels.

[talltalk] 03/1/2014 15:04

Very large spread - does not reduce when seeking to deal

[jhan66] 03/1/2014 08:06

Your pretty good at this Aleman. Good luck in 2014

[aleman] 16/12/2013 10:15

It has to be a little worrying, although the recent EBRD loan required a certain due diligence. The company's record of generating cash and improving balance sheet over several years, despite weaker trading, should provide some comfort. You can fake profit and eps but the consistent cash generation is hard to fake. I think we should be concerned but shouldn't panic.

[mrphil] 16/12/2013 09:34

Chief Financial Officer resigning seems a bit out of the blue, and I see they haven't thanked her for her efforts while in office. Should we be concerned?

[aleman] 22/11/2013 19:04

Interesting developments, there, ff. Thanks for pointing it out.

[freddie ferret] 22/11/2013 17:20

Aleman
That article is very old suggest you look at the Ukrainian news today concerning future relations with the EU and Russia. It seems according to the latest that Ukraine is opting for Russia.

[aleman] 12/11/2013 12:51

Looks like NAV might be going to be devalued a bit, although the shares are so far below NAV (with a small intangibles number) that it probably won't matter much.

[davebowler] 12/11/2013 12:39

Franklin Templeton takes $5bn Ukraine debt gamble: Franklin Templeton, a big US money manager known for astute but aggressive bets in the sovereign debt market, has emerged as the dominant bankroller of Ukraine despite the country teetering on the edge of an economic crisis.The investment group has snapped up Ukrainian international debt with a face value of almost $5bn at the end of August, nearly a fifth of the country's outstanding international government bonds according to data gleaned from Bloomberg. Full Article

[aleman] 25/10/2013 18:32

I wouldn't worry about it. The shares are priced for problems and losses yet it's investing to modernise and improve margins in markets that are expected to strengthen while it's remained profitable and grown its balance sheet consistently through the difficult period of the cycle. It's always impossible to rule disaster out but the balance of probabilities are hugely to the upside because the shares are so cheap. It's just a matter of being patient. A change of director doesn't stop them being ridiculously cheap.

[mrphil] 25/10/2013 07:47

I suppose the departure could be taken either way, see what the market thinks.

[aleman] 17/9/2013 11:43

Certainly could have, although the other numbers are nothing like as bad as the EPS. Underlying cashflows only fell a bit and the balance sheet improved. (The balance sheet looks very strong compared to market cap and net current assets exceed the market cap, before a strong balance of plant and equipment to debt.) Interest took a bigger slice of that cash generated, though, and the issue about recovering VAT on distribution services and their collapse needs better explaining. The good news is it's distribution collapsed so much that it might not be a problem any more and branded products - the biggest bit - is growing sales strongly. What if they sort it and distribution bounces back and branded products keep growing and margins recover? It is worrying that they keep blaming commodity prices for their woes and now have this distribution issue on top but the shares seem to have long since discounted this.

Will it ever come good? It reminds me of RGD, which eventually rocketed when the sugar price went the right way but it also reminds me of HAIK where the shares used to bounce around tremendously with slight swings in slim refining margins due to its debt and the shares are back at the bottom.. I still think UKR shares are cheap enough to justify holding, and could even be a 10-bagger one day, but I don't see a dividend this year and it could bump along the bottom a long time.

[mrphil] 17/9/2013 08:54

Could have been better :-(

[freddie ferret] 05/9/2013 16:10

Is this traded on the ISDX?

[aleman] 28/8/2013 16:29

Offer back up to 15.25p but bid is up 0.25p to 13.0p this time. Odd.

[aleman] 28/8/2013 13:21

Offer just axed to 13.5, a drop of 11.5% with the bid the same. Funny that ADVFN now chooses to report the price rose to 13.5p based on an AT trade at that price. It's a strange carry on trying to follow this one.

[aleman] 28/8/2013 09:45

Offer gone up again. Now 12.75/15.25 which puts the mid-price at a 2 month high of 14.0p.

[aleman] 22/8/2013 09:56

Only the offer going up again as if they are trying to deter buying. (Not showing on ADVFN as they only report the last AT trade price.) They must be short of stock. 20% spread is ludicrous.

[aleman] 20/8/2013 11:14

2 x 200k gone though at mid. That's 2 x 0.5% of total in issue.