TMFMmbop (97.53)

Another Crazy Cheap Stock...

April 21, 2009 – Comments (6) | RELATED TICKERS: PM , BTI , RAI

Welcome back to the ongoing series "Crazy Cheap Stocks That Are Extraordinarily Difficult to Buy," where we profile compelling international stock opportunities that are tricky for American investors to get a hold of. If you missed the first installment, it's here. Crazy cheap stock #2 begins below.

Begin at the beginning
If you find your way to the Prague Stock Exchange and quote the ticker BAATABAK, you'll see a familiar name pop up: Philip Morris. Indeed, this purveyor of cigarettes is a global behemoth, with the world's #1 brand (Marlboro) and cash flow generating capabilities that other companies can't even fathom.

But BAATABAK isn't you're basic Philp Morris. It's actually Philip Morris CR AS, a subsidiary of Philip Morris International (NYSE: PM) that's in charge of manufacturing and selling cigarettes in the Czech Republic and Slovakia. Philip Morris is by far the dominant cigarette in Czech Republic with, if you believe PM's 10-K, substantially more than 15% market share. (British American and Reynolds American be darned.)

Due to the nature of its business, PM has operating subsidiaries in many, many countries. But if I've counted correctly, only two are public. And the reason why I've dialed in on BAATABAK today is that while it offers the same strong brand, balance sheet, competitive position, and business as Philip Morris international, it offers something more in exchange for trading geographic diversity for geographic concentration in the Czech Republic and Slovakia: a 15.2% dividend yield.

That's right, a 15.2% dividend yield.

Which is pretty good
That's extraordinarily high given the quality of the underlying company and the fact that PM will not be pulling out of either of these countries anytime soon. Thus, BAATABAK is likely to receive the support of its parent if it ever has any issues with debt (though the balance sheet is fairly strong with $143mm in cash against $146mm in total debt).

BAATABAK has had some issues with inventory build-up as an excise tax increase went into effect in the Czech Republic last year, but its cash flow record is good and the support of the parent leads me to believe that the high-yield here is a pretty good deal...as long as you have access to the Prague Stock Exchange.

Pack your hideously unmistakeable neon blug bags...