Acomo: Sturdy, Resilient And Buying and selling At Much less Than 10x FCF

Introduction

Acomo (OTCPK:ACNFF), beforehand generally known as Amsterdam Commodities, is a Dutch firm specializing in the sourcing, buying and selling, processing and distribution of meals merchandise. With in extra of 600 merchandise (together with spices, tea and oil), Acomo comes fairly near what the Dutch East India company did within the 17 th and 18 th century.

Acomo’s fundamental itemizing is on Euronext Amsterdam the place it’s trading with ACOMO as its ticker symbol. As the typical day by day quantity in Amsterdam is nearly 40,000 shares per day, I’d strongly advocate to make use of the corporate’s Dutch itemizing to commerce in its shares.

Acomo is a money cow

Again in 2020, I used to be stunned at how resilient Acomo was through the COVID pandemic. As you may see beneath, the revenue in 2020 actually increased whereas the EBITDA only slightly decreased and that was very comforting to see as Acomo received by way of the pandemic with out too many points.

The sudden bump in income and EBITDA in 2021 was attributable to the acquisition of Tradin Organics from SunOpta in December 2020. Acomo funded the all-cash transaction with a mixture of fairness (by way of a capital raise priced at 19.50 EUR) and debt.

Sadly the corporate doesn’t publish quarterly outcomes, and besides in unexpected circumstances, there are not any interim buying and selling updates both. Whereas probably the most just lately out there monetary information stems from H1 2022 and could seem outdated, I would prefer to suppose that contemplating no revenue warning has been issued but, the H2 outcomes would have been roughly in step with the expectations.

Through the first half of 2022, Acomo reported a 15% revenue increase, which jumped to virtually 712M EUR. And because the firm was not immune for margin strain, the EBITDA elevated by simply 5% to 56.1M EUR for an EBITDA margin of just below 7.9% in comparison with 8.6% within the first half of final yr.

This doesn’t suggest the outcomes had been unhealthy, and the earnings assertion beneath the EBITDA outcome had been fairly respectable, as you may see beneath. The online earnings was 31.2M EUR of which 31.1M EUR was attributable to the shareholders of Acomo, leading to an EPS of 1.05 EUR.

Whereas the underside line is not growing as quick because the income is, I am nonetheless inspired to see a internet earnings improve of 8.7%.

The curiosity bills elevated, not due to increased rates of interest (which weren’t too noticeable but within the first semester of 2022) however as a result of the corporate borrowed extra cash to fund its working capital investments. As you may see beneath, the reported working money movement was a adverse 5.9M EUR, however this was primarily attributable to the 47.8M EUR funding within the working capital place.

On an adjusted foundation, and after additionally together with the two.3M EUR lease cost, the underlying working money movement was 39.6M EUR. And because the complete capex was simply 1.9M EUR, the underlying free money movement was 37.7M EUR or 1.27 EUR per share based mostly on the present share depend of 29.6M shares excellent.

Seeing how the free money movement is increased than the reported earnings shouldn’t be a shock because the sustaining capex is considerably decrease than the depreciation and amortization bills. In 2021, for example, the annual report confirmed the overall depreciation and amortization bills got here in at 24.6M EUR whereas the capex (7.8M EUR) and lease funds (4.1M EUR) on a mixed foundation had been simply over half the depreciation and amortization bills.

The adjusted working money movement in FY 2021 was 79.9M EUR and after deducting the capex, the underlying free money movement outcome was even in extra of 72M EUR or 2.43 EUR per share.

I am undecided Acomo will have the ability to maintain its full-year free money movement outcome secure. Whereas I count on the full-year EBITDA to beat final yr’s 105M EUR in EBITDA, I am primarily involved concerning the influence of upper rates of interest on the curiosity bills. As of the tip of June, Acomo had 362M EUR in gross debt and a 200 foundation level curiosity improve would lead to a 7.3M EUR improve in curiosity bills and a subsequent lower of the adjusted free money movement by 5.5M EUR or 19 cents per share. Fortuitously Acomo was capable of amend its financing agreements with its lenders, so there is no such thing as a near-term strain on the group.

Funding thesis

The growing rates of interest make debt administration extra essential than ever. And whereas Acomo’s underlying free money movement (excluding working capital adjustments) are very robust, we will not deny these WC investments are a drag on the monetary efficiency and debt ranges. That being stated, the corporate had a constructive working capital place (present belongings minus present liabilities) of 245M EUR because of a excessive stock degree (439M EUR). Whereas growing stock ranges could possibly be a purpose to be involved, the monetary statements clearly present Acomo’s stock ranges are growing in step with its income improve. As of the tip of 2021, inventories represented 31% of the income whereas that proportion has remained secure based mostly on the annualized H1 income. It is a drag, however not a priority.

I at present don’t have any place in Acomo, however I’ll go lengthy within the subsequent few weeks.

Editor’s Be aware: This text discusses a number of securities that don’t commerce on a serious U.S. alternate. Please concentrate on the dangers related to these shares.