GLEN:GBR - Embedded Expectations Analysis - 2019 01 15
Glencore Plc (GLEN:GBR) currently trades below recent averages relative toUAFRS-based (Uniform) Assets, with a 14.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management has concerns about capex spending, cost reduction efforts, project initiatives, and restructuring charges
Specifically, management is confident in their large working capital flexibility, and about free cash flow outlook. Management is also confident in their capital nets and capital risk exposure. However, management may not be confident in the sustainability of commodity demand given macroeconomic uncertainties. Management may also have concerns about capex spending, and substantially elevated prices driven by inventory reductions. Furthermore, management may be concerned with valuations and cost pressure in their coal business. Management may also have concerns about delivering on goals for some of their African and South American mining operations, and may be exaggerating the operational cost savings that the jumbo cell may bring once operational. Furthermore, management may have concerns about recent restructuring and their ability to transition newly promoted employees. Management may also have concerns about the impact of discontinued consolidated methods had on net income, and may be understating concerns about the presence of uranium in exports. Finally, they may be exaggerating the business potential of projects across the oil industry
Glencore is engaged as a natural resource companies. Co. is organized and operates on a worldwide basis in three main business segments: Metals and minerals, which comprised of zinc, copper, lead, alumina, aluminium, ferroalloys, nickel, cobalt and iron ore; Energy products, which comprised of crude oil, oil products, steam coal and metallurgical coal; and Agricultural products, which comprised of wheat, corn, canola, barley, rice, oil seeds, meals, edible oils, biofuels, cotton and sugar supported by investments in storage, handling, processing and port facilities.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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