The Company is a leaf tobacco merchant and processor, based on volumes handled by its subsidiaries and affiliates and has operations in agri-products.
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UVV is one of those long running boring stocks. It has increased dividends for 40 years and is moving to it's 52 week high. It is low priced based on earnings and book value (10 & 1.4), although a little high FCF of 25. Fiscal 2010 earnings est. for 2010 are almost pegged to double since 2007. Yes, revenues are flat for 2010 after about a 19% increase, but the share price will benefit from the share buyback plan of 150M. And total return (assuming dividends reinvested) is (from Schwab):
1 Year +93.7%
3 Year +13.8%
5 Year +29.7%
Not bad for a boring stock. I bought back in 7/09 at 38.93, so I have a pretty good gain so far at a div. yield of 4.8%. My total return is 41% and I'm sticking with it for a new 52 wk high, IMHO.
Just my thinking about why I think it rates more than 3 stars.
Penchymd, what risks do you see with some of UVV's customers competing with UVV for sourcing contracts and how much impact do you expect them to have? For example, Philip Morris International Brazil just signed a contract (in June 2010) to direct buy tobacco from 17,000 farmers in Brazil. UVV is reported to have signed over 20% of their contracts with farmers in Brazil in this deal. Alliance One International, is also selling inventory management software and other assets to PMI as part of this deal in addition to some of their contracts. How do these types of deals impact UVV's profitability and business model? Do you foresee this trend in the industry continuing?
I think UVV is a good company at a relatively cheap valuation, but if the business model's fundamentals are at risk, this may not be as good of a deal as I originally thought. If the business model is not significantly impacted, this is a good deal. Time will tell. This type of deal concerns me because I think UVV has a major customer that makes up more than 10% of their sales. If this major customer were to start sourcing directly like PMI Brazil has, and discontinue using UVV, this could have significant negative effects on UVV's financial performance going forward.
Btown
I see the direct sourcing to be reflected now in the institutional holdings. It is down 9.8% since same period last year, which could be telling. But who really knows? I looked for information in the PM reports, but no mention of direct sourcing contracts was mentioned.
They did increase the dividend again, so maybe things are well, but we won't know until February 2011. UVV is frustrating because it offers no guidance.
Here is an interesting comment by Market Edge:
Recommendation
Stock shows Strongly Improving Conditions. SCORE = 3
If you are short this stock, consider covering or monitor stock closely.
Stock is Not a Buy Candidate.
S&P has dropped analytical coverage, which means what? You may already have this information.
10/25/10 09:12 am ET ... S&P DROPS ANALYTICAL COVERAGE
ON SHARES OF UNIVERSAL CORP. (UVV 41.0): We are dropping
analytical coverage of Universal Corp., an independent leaf tobacco
dealer, due to a shift in our investor focus. Our previous opinion on
the shares was hold (UVV 41.00***). /E.Kwon-CFA
September 21, 2010
03:32 pm ET ... CORRECTION - S&P MAINTAINS HOLD RECOMMENDATION ON
SHARES OF UNIVERSAL CORP (UVV 39.1***): At analyst meeting, UVV outlined
challenges and opportunities. Business with its largest customers Philip Morris Int'l
and Japan Tobacco will continue to transition (last two words added) through FY 12
(Mar) as more volumes move to direct sourcing. New processing contacts in the
U.S. are unlikely to renew at the same volumes as contracts expire in May '11.
However, with a weaker dollar, U.S. flue cured crop is already very attractive vs.
Brazilian. Still, we think the outlook will be challenging after a strong FY 10. We keep
our $41 target price, on peer and historical analysis. /J.Agnese; E.Kwon
Mark, hungering for information.