Fresh Del Monte: Valuation and Analysis Series (Part 3)

In the first two of four articles in this series, here, and here, I got into valuations and analysis of Dole (DOLE) and Chiquita (CQP).

Fresh Del Monte (FDP) will be the subject of this article.  I will detail their operations, and do two valuations of the company.

In the fourth post of this series I will attempt to determine if a merger between any of the three companies should happen, and what I think would be the best options. I will go over the margins of each company and try to determine if any of the three have any sustainable competitive advantages. I will also put forth my thesis of which one, if any, would be a good long-term buy without the possibility of a spin-off or merger from any of the companies.

Fresh Del Monte Produce Inc. is one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared food in Europe, Africa, the Middle East and the countries formerly part of the Soviet Union. Fresh Del Monte Produce Inc. markets its products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability for over 100 years.  Description taken from their website here.

For further information and specifics of their operations please refer to their website.

Both Fresh Del Monte valuations were done on 6-20-2012. All numbers are in millions of U.S. dollars, except per share information, unless otherwise noted. Valuations done using March 2012 10Q and 2011 10K.

These valuations are done by me, using my estimates, and are not a recommendation for you to buy the stock. Do your own homework.

Assets:Book Value:Reproduction Value:
Current Assets
Cash27.527.5
Marketable Securities00
Accounts Receivable (Net)407300
Inventories445178
Prepaid Expenses38.715
Deferred Taxes-Tax Liability00
Total Current Assets918.2520.5
PP&E Net1016450
Goodwill405150
Intangible Assets68.420
Total Assets2407.61140.5
  • Total Shares=59

Reproduction Value:

  • With IA 1140.5/59=$19.33 per share.
  • Without IA 1120.5/59=$18.99 per share.

Current price is $22.66 per share on 6-23-2012.

Second Valuation:

  • Cash and Cash equivalents of 27.5
  • Number of shares are 59
  • Total current liabilities are 548.5

Short term investments + cash and cash equivalents – current liabilities =

  • 27.5+0-548.5=-521
  • -521/59=-$8.83 in net cash per share.

Fresh Del Monte has an EBIT of 106.5, using trailing twelve months numbers.

5X, 10X, and 14X EBIT.

  • 5X106.5=532.5+27.5=560
  • 10X106.5=1065+27.5=1092.5
  • 14X106.5=1491+27.5=1518.5
  • 560/59=$9.49 per share.
  • 1092.5/59=$18.52 per share.
  • 1518.5/59=$25.74 per share.

Current share price is $22.66 per share on 6-23-2012.

Current market cap is 1,350 million.

Enterprise value is 1,510 million.  Enterprise value taken from Yahoo Finance.

  • EV/EBIT=1510/106.5=14.18

In the last article here on Chiquita, I got into one of my major gripes with them, their huge amount of total long term contractual obligations.  I am now going to compare Fresh Del Monte’s total long term contractual obligations with theirs.

On page 54 of Fresh Del Monte’s 2011 10K is a table describing their total contractual obligations, which come out to a total of $1.992 billion.  They have a current market cap of $1.31 billion.

That is a much more sustainable ratio than Chiquita’s total obligations of $3.2 billion and their total market cap of $220 million.

The fourth and final article in this series will be next.  I will try to determine which company, if any, I would buy without the possibility of any kind of spin off or merger.  I will try to determine if a merger between any of the three would be a good thing.  I will also go over margins of all the companies, and their specific operations to see if any of them have any sustainable competitive advantages.