Rolling in Soybeans

Soybeans are hot: World demand is up, especially in China, and Big Board-listed Bunge (BG ) is reaping big gains. Founded in the Netherlands in 1818 and now based in New York, Bunge is the top processor of soybeans in North and South America. Shares of Bunge, which went public in 2001 at 16, have since jumped to 27. Even so, Bunge is undervalued, says Tim Rudderow of Mt. Lucas Management, which owns shares. Bunge is a pure play in soybeans, he says, "and we think demand will continue to surge." Soybean inventory, he notes, is tight because output from top producers Brazil, Argentina, and the U.S. is fast eaten up by rising demand. In April, a bushel of soybeans leaped from $5 to $6.30 -- way above the '90s average of $5.50. Bunge has recently sold its Brazilian food-ingredient operations to a joint venture with DuPont (DD ). Bunge is also a major fertilizer producer, and the joint venture will supply products for farmers. The sale, which netted Bunge a tidy $111 million profit, shows how undervalued Bunge's assets are, says Leonard Teitelbaum of Merrill Lynch (MER ), a co-underwriter in Bunge's initial public offering. He recommends the stock as a buy. Standard & Poor's Joseph Agnese, who rates Bunge "accumulate," expects sales to advance more than 35% in 2003. Trading at 10 times his 2003 earnings estimate of $2.75 a share, Bunge is attractive relative to its peers' average price-earnings ratio of 12, says Agnese.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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