Machinery
August 16, 2010LUAZ — Stuck In a Market Jam In 2010, Bogdan Motors, a member of Bogdan Corporation (the second largest Ukrainian automobile producer), will only begin its slow recovery after a major hit inflicted by the financial crisis. The company’s net sales are poised to gain a mere 2% this year over 2009, yet this will account for only 12% of its pre-crisis 2008 sales. Although the Company is claiming to turn profitable in 2010, we retain a more conservative forecast of a net loss of USD 23 mln, based on its net loss of USD 11 mln posted for the 1Q2010. During the past two years, Bogdan absorbed a huge debt of USD 353 mln, and interest payments will erode its bottom line for 2010 and 2011. Bogdan’s net margin will probably not return to a green zone until 2012. The stock’s EV/EBITDA and P/E multiples are of no relevance due to Bogdan’s oversized debt and forecasted net loss in 2010-11, while its 24% discount to emerging market peers in 2011 P/Sales is unwarranted. SELL.