AEP Industries (NASDAQ:AEPI)

CAPS Rating: 3 out of 5

Manufacturer of plastic packaging films. The Company manufactures and markets an extensive and diverse line of polyethylene, polyvinyl chloride and polypropylene flexible packaging products, with consumer, industrial and agricultural applications.

Recs

3
Player Avatar TMFDeej (99.27) Submitted: 8/18/2010 3:40:48 PM : Outperform Start Price: $25.20 AEPI Score: +62.75

AEP produces a commodity product known as plastic film.While the company does not appear cheap at first glance, its numbers should improve as time passes. It was hit by a double whammy of high oil prices in 2008 causing its input costs to soar and the Great Recession after that crushing demand for its products.It's a testament to AEP's management that it survived this mess. As an added bonus it even was able to pick off the assets of a competitor, Atlantis Plastics, after the aforementioned headwinds forced it to file for bankruptcy. I love it when companies see competitors go bankrupt. It often leads to dramatic gains in revenue and profits for the survivors. It's even better when a company can purchase the assets of the competitor that is in BK on the cheap. AEP was able to grow its production capacity by 40% in one brilliant move.Add to this shrewd acquisition an improvement in margins as a result of AEP closing its terrible European business.The prices of the company's key inputs have fallen significantly lately. This and any continued synergies that can be squeezed out of the Atlantis acquisition should lead to a dramatic improvement in margins and profits in the second half of the year.Deej

Member Avatar TMFDeej (99.27) Submitted: 9/7/2010 2:06:10 PM
Recs: 0

We can now add the catalyst of an activist investor to the AEP mix. Last week JMB Capital reclassified its 9.5% investment in AEPI from “passive” investor to “active." AEP already seems to be headed in the right direction. It will be interesting to see what action, if any, JMB takes.

Deej

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