VALE3 - Embedded Expectations Analysis - 2018 12 03
Vale S.A. (VALE3:BRA) currently trades at recent highs relative to UAFRS-based (Uniform) Assets, with a 1.0x Uniform P/B, suggesting somewhat bullish expectations for the firm. However, management may have concerns about their Salobo and Gelado investments, premium quality product pricing, and their customer retentionSpecifically, management may lack confidence in their assertion that most of their consumers will stay in Europe and Brazil, and may have concerns about their customers moving to China. Also, they may have concerns about their capital allocation strategies, and may lack confidence in their ability to continue returning capital at expected rates. Furthermore, they may lack confidence in their ability to drive strong returns from their Salobo and Gelado investments, and to meet their Salobo III production targets. Finally, they may be concerned about the sustainability of current quality premium prices, and may lack confidence in their ability to continue capturing price increases from their premium products, particularly their pellets
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
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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