Wall Street Taking Notice of Undervalued Amira Foods (ANFI)

Stephen L Kanaval  |

We have been writing about Amira Foods (ANFI) for a long time here at Equities. We covered how short-sellers viciously attacked and rallied investors behind the company and continue to advocate for Amira and take on short-sellers directly.

Equities covered the stock as it bounced back and punished those short-sellers with improved price and increased volume while the company battled through a downtrend in the rice market by partnering with UAE Man Consumer. This deal allowed Amira to sell it products in Dubai and sponsored the annual food and hospitality show there to much fanfare. In August the company forged an alliance with United Phosphorus Limited, a crop and seed company. The alliance would allow Amira access to UPL’s rice technologies and secure their rice value chain in India. Following that, analysts had estimated that rice sales would upswing and ANFI was in good financial position to benefit.

Today, Amira received another strong rating from Jeffries. The “Buy” designation came on the strength of the rising rice market and ANFI’s premium basmati sales going up with middle class Asian customers. Jeffries concluded, as Equities did last year, that the short-sellers were dishonest and that ANFI was worth the investment because of increased demand and the stock’s attractive entry price. As the middle class in Asia grows, many will buy basmati, a more expensive rice, with more disposable income available.


The Jeffries Analyst Note was as follows:

ANFI is a basmati/specialty rice company that is poised to benefit from doubling of the Asian middle class & corresponding trade-up to premium basmati rice. A discredited short campaign combined with a temporary oversupply of basmati rice hurt ANFI’s FY16 results. In recent months, export demand has accelerated & basmati prices have stabilized, creating an especially attractive entry point for LT investors. We are initiating coverage with a Buy rating & $13 PT.

We believe the short thesis has been discredited. In July of 2015, a boutique short seller alleged ANFI overstated revenues and failed to disclose third party transactions. Reasons short thesis has been discredited: 1) Independent 3rd party Forensic by BDO LLC found claims to be unsubstantiated and/or unfounded; 2) ANFI completed its FY2015 annual report with new auditor including audit of FY15 and re-audit of FY14 and FY13; 3) Judge dismissed class action lawsuit against ANFI; 4) ANFI had no issues servicing its debt despite reporting a ~20% decline in revenues; 5) our due diligence.

Why buy now? Supply is expected to be flat for a second year in a row (after being up 33% in 2014-15), demand has started to accelerate (basmati rice export volumes were up ~24% in June) and prices have been stable since January 2016 after having come down ~46% since peaking in May of 2014. Improving industry fundamentals, combined with a more normal operating environment should result in ANFI returning to growth in FY17. Additionally, the stock's valuation is really cheap.

Long-term demand prospects for basmati remain best-in-class. The global middle class population is expected to go from 1.8B in 2009 to 4.9B in 2030, with 85% of the growth stemming from Asia. Given that 90% of rice is consumed in Asia, as Asian incomes rise, consumers will trade up and buy premium rice varieties, like basmati rice. As such, we expect basmati rice demand and ANFI’s sales to grow at a DD pace LT.


Our $13 price target conservatively values the company at 7.2x our FY18 base case EBITDA estimate of $92.6M, more in line with its agribusiness peer group average of 8.1x than its current valuation of 5.5x NTM EBITDA but well below its SMID-cap peer group average of 12.8x. Risks include: Volatility in basmati paddy prices; (2) FX risk; (3) lower than expected basmati rice demand; (4) limited FCF generation; and (5) short seller attacks.


Amira continues to grow and has the makings of being a major global player in a rather disparate market. As of today, the global rice markets 5 largest companies are only 25% of the market, so there is much that can be consolidated or acquired. What an interesting way to get long rice !!!

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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