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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (30959)	5/21/2008 6:55:43 PM
From: E_K_S	Respond to of 78645

Started a small position in Ultrapetrol (Bahamas) Ltd. (ULTR. The company released their Q1 2008 earnings last week and reported a record 48% increase in revenues. The increase in revenues was due primarily to higher shipping rates from their Ocean Fleet business (revenues up 144% YOY) but after drilling down the company also showed good growth in their River Fleet Business (up 26% YOY). Analysts have estimates of $1.35/share for 2008 which is equivalent to a 9.5 PE. The stock has doubled in value from its low in March($7.75/share) . Here is the composition of their current fleet (http://www.ultrapetrol.net/fleetlist.asp). The company is investing in their River Business and will be increasing the fleet size by 12% with 56 new barges and three new push boats to be deployed by 3Qtr 2008. They are building a new terminal port but still can not meet the growing demand from soybean and iron ore shipments. They currently obtain margins in the high 20% and it appears they will have excellent pricing power and operating efficiencies to achieve margins in the low 30%. The River Business generates 35% of the company's revenues and is growing at a 14% annual rate. With a company 9.5PE this business segment is undervalued by 36% or about $1.50/share. Their Offshore Supply Fleet business has multi-year locked in service contracts and is their most profitable business segment. They have seven new vessels under construction which will eventually be added to their current fleet of five, more than doubling their revenues in the next 24-36 months. Current cash flow from their fixed service contracts more than covers their debt obligation once the new ships are delivered. Finally, there was a $0.12 share adjustment to earnings due to currency exchange gains from $US/$Real conversion. That's a hidden gain of a 23% pop to earnings from a falling $US. A bonus that adds diversification to ones portfolio from a falling $US. ----------------------------------------------------------- The take away for me is that this was a good find Paul. The company has a lot of very profitable and growing business segments that should grow faster than a PE of 9.5 imputes. There are very few analysts that cover the company and their 2009 estimates are all over the board. If the company earns $2.00/share in 2009 and is priced at a 14PE to reflect their high margin service businesses (River and Offshore Fleet), the stock would be fairly valued at $28/share. I plan to build my small position over time since the stock has already had a huge run higher and may move lower in any market correction. EKS