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This Deep Value Investor Explains Why He's Long Amira Nature Foods: 'It Was Cheap' And Expanding

  • Shares of Amira Nature Foods Ltd (NYSE: ANFI) were trading up more than 47 percent on Wednesday morning.
  • The company announced an independent investigator found certain allegations made against the company were unsubstantiated and unfounded.
  • Benzinga contacted deep value investor Tim Melvin for some comments on the issue. The money manager explained why he is long Amira Nature Foods.
  • Shares of Amira Nature Foods were trading up about 47 percent on Wednesday morning, after disclosing that “an Independent Third Party Forensic Investigation has been completed by BDO LLP.”

    According to a filed with the SEC on Tuesday evening, the company had “engaged BDO to review certain allegations that have been made against the Company. The review included i) an analysis of the Company’s reported international Basmati sales relative to Amira Pure Foods Private Ltd.’s (‘Amira India’) exports of Basmati rice as identified by the Agricultural and Processed Food Products Export Development Authority (‘APEDA’); ii) an analysis of the allegations in respect of the reported Basmati market size in India; iii) a comprehensive review of the transactions with the Company’s largest customer for 2015; iv) a comprehensive review of the Company’s related party transactions and its disclosure of such transactions, including the potential existence of undisclosed related party transactions with its top customers and named suppliers in 2014 and 2015 and; v) a review to identify the existence of undisclosed revenue transactions with Karam Enterprises since the time of the Company’s initial public offering; BDO has independently concluded that these allegations are unsubstantiated and/or unfounded.”

    After the filing of this Form, Benzinga contacted Tim Melvin for some comments on the issue.

    Related Link: Exclusive: Philidor Calls Short-Sellers "Discredited" And "Patently False"

    Tim Melvin’s Take

    The investor told Benzinga that Amira Nature Foods was cheap when he bought it, and that’s why he’s long now. “It was trading at an EV/EBiT multiple of just 4.3x.”

    “Earnings have been growing and they are expanding into new markets,” he added. “The short seller had an uneven track record and the fact they pushed back legally told me they were comfortable with they had done no wrong,” he explained.

    “Deloitte confirmed that they had no issues with the company so after my review of financials I was comfortable owning a growth company with the potential for rather large market expansion at a bargain price,” Melvin concluded.

    Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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