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Finance and Investment Club at UC Davis. Dhinesh Ganapathiappan Andrew Lee Alex Vong Ying Wu. Company Profile. Company Profile Industry Analysis Key Statistics Stock Performance Competitors SWOT Analysis Recommendation.

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Finance and Investment Club at UC Davis

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Finance and investment club at uc davis l.jpg

Finance and Investment Club at UC Davis

Dhinesh Ganapathiappan

Andrew Lee

Alex Vong

Ying Wu


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Company Profile

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Canadian fertilizer company founded in 1953 and located in Saskatoon, Canada

  • Operates in the Basic Materials sector (i.e., chemicals, minerals, metals, oil, gas) of the economy and also the Nonmetallic Mineral Mining industry

  • Beyond being a key producer of solid and liquid phosphate fertilizers, it also makes industrial and animal feed products. These are all important nutrients for farmers and consumers alike

  • World's largest fertilizer enterprise by capacity in making three primary plant nutrients -- potash, nitrogen and phosphate. Potash, hence the name of the company, achieves the highest quality earnings when compared with all other fertilizer companies. Products combined are 23% of the entire word's supply


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Company Profile

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Produces potash in Canada from six mines in Saskatchewan and one mine in New Brunswick, phosphate and feed supplements in the United States and Brazil as well as nitrogen in the United States (Georgia, Louisiana, Ohio) and Trinidad

  • Sells its products to retailers, cooperatives, and distributors that provide storage and application services to farmers in North America and growing offshore markets

  • Utilizes world's excess potash supplies, low-cost operations, and strategic global investments in its common day-to-day operations

  • Goal is to be the ultimate "partner of choice" among all fertilizer companies, has a business strategy called the "Potash First Strategy" with an emphasis on meeting consumer demand while generating profit


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Industry Analysis

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Fertilizer has long been used by farmers to significantly increase crop yields

  • Demand has been rising for crops as emerging countries emerge from poverty and require more basic foodstuffs, thus increasing the demand for fertilizer

  • Crops have also been used recently for creating biofuels such as ethanol in order to combat reliance on foreign oil and be better for the environment

  • Lawmakers in 2005 enacted legislation to mandate the use of 7.5 billion gallons of ethanol a year by 2012, and are currently in the process of passing a bill to require 36 billion gallons of biofuels by 2022

  • The Saskatchewan potash industry began in the 1950s and 1960s and is currently the regional world leader in potash exports


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Industry Analysis

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation


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Industry Analysis

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation


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Industry Analysis

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation


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Industry Analysis

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation


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Key Statistics

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • NYSE Ticker: POT

  • Stock Price: $129.19

  • Market Capitalization: $40.6 Billion

  • Trailing Price to Earnings Ratio: 45

  • Estimated Forward PE Ratio: 26

  • Short interest of float: 1.1%

  • Return on Asset: 11.6%

  • Return on Equity: 24%

  • Debt: $1.43 Billion

  • Insider Holdings: 6% of float

  • Annual Dividend: $0.40

  • Analyst growth estimate for next 5 years: 10% per annum

*** As of December 7, 2007


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Stock Performance

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • 1 month: + 5%

  • 3 months: + 48%

  • 1 year: + 175%

  • 2 years: + 375%

  • 5 years: + 1,130%


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Stock Performance

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

2 Year View


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Competitors

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation


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Competitors

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

1 Year POT vs CF vs MOS vs DJIA


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SWOT Analysis - Strengths

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Low-cost producer with 23 percent of world capacity and majority of world excess capacity

  • Manufacturing is relatively cheaper than competitors

  • Access to key markets through Canadian operations, a global distribution network and strategic offshore investments

  • Headquartered in Saskatchewan, the region with the most potash supply in the world

  • Leading player in the market, ability to add capacity like a November 2007 announcement of a $1.8 billion mine and mill expansion that will boost output of company by 15% within 5 years

  • New output will be low-cost, tax-efficient, and 25% less than building an all-new mine and mill

  • Significant pricing power as demand exceeds supply


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SWOT - Weaknesses

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Potential mine failures can disrupt production, as witnessed in competitor Silvinit’s Russian mine

  • Reliance on natural resources to produce output

  • Financial position - $1.43 billion in debt


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SWOT - Opportunities

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Operates in industry resistant to recessions

  • Constant and increasing global demand for fertilizer

  • Global population expected to increase to 9 billion in 2050

  • High barriers to entry: $2 billion cost to construct a potash plant, takes years to begin producing fertilizer

  • Profiting from the Ethanol boom amidst record high oil prices and outcry for cleaner energy

  • Emergence of developing countries from poverty, increasing demand for basic foodstuffs

  • Implementation of E85 flexfuel vehicles (supported by GM) – 85% ethanol and 15% traditional oil


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SWOT Analysis - Threats

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • Political turmoil from operating in foreign nations

  • Domestic politics regarding the Ethanol industry – including potential subsidies, incentives

  • Competition from international corporations building new mines and oversupplying the market


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Recommendation

  • Company Profile

  • Industry Analysis

  • Key Statistics

  • Stock Performance

  • Competitors

  • SWOT Analysis

  • Recommendation

  • We rate PotashCorp a Strong Buy based on the ever-increasing need for fertilizer as emerging countries require more food and ethanol becomes a viable alternative energy. Demand will continue to outstrip supply for years to come, and few risks and weaknesses weigh PotashCorp down. The company is insulated from recessions and will not be affected by the US credit crisis. Furthermore, the international focus and status as the worldwide market-leader for fertilizer gives PotashCorp great leverage to profit from the favorable market trends. Despite the seemingly huge run-up in the stock, the fundamentals remain in place for consistent returns that significantly outperform the market with limited downside. Finally, investors and analysts alike do not fully understand and appreciate the lucrative fertilizer industry, leaving plenty of opportunity for upside as awareness increases.


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