MBAC Fertilizer (MBC) achieved quite a high, but has fallen sharply. Nonetheless, the company seems to have potential; how would your rate its prospects? Is now the time to buy?
Thanks for the assignment. MBAC Fertilizer Corp.(MBC TSX) operates out of Brazil where it seeks to become an integrated producer of phosphate fertilizer and related products. Brazil wants to replace imports of fertilizer with domestic supply. In my youth I had some hands on experience with fertilizer imports into Brazil.
In 1972 at the age of 16, I worked as an oiler on the Motor Vessel Syra loaded with 13,000 tons of phosphates which we picked up in Tampa, Florida. It took about 12 hours to load the entire cargo using modern port facilities. When we arrived in Maceio, Brazil it took two weeks of around the clock effort by men working with trucks, ladders, buckets, and shovels to unload an 1/8 of the cargo. A real eye opener for a kid from Flushing N.Y.!
MBC began production from its flagship Itafo Arraias project in 2013 and has two other projects in development. The rub on the stock has been liquidity issues that management has been working to address and there are also debt restructuring negotiations in progress.
An examination of the charts will help identify if now is a good time to buy.
The three-year chart is certainly no oil painting unless you were short the stock. The macroeconomic environment for the fertilizer business has been under pressure as producing syndicates have broken up and new mines have added to supply with no countervailing increase in demand. The shares began their decline in early February of 2013 when they traded at a high near $3.87. The MACD and the RSI both generated sell signals in early January of 2013 which would have alerted the vigilant investor that buyers were becoming scarce. The death cross that formed in April of 2013 when MBC was trading near $2.00 was another indicator that could have preserved some hard earned capital. From there its been nothing but the merciless destruction of shareholder value.
The six-month chart illustrates the painful decline to the 52-week low of $0.05 in October of 2014. A trade did set up off the rock bottom as the MACD and the RSI both generated buy signals that lifted the stock until it met resistance along the 50-day moving average.
From the analysis conducted there are more negatives than positives. There is an established downtrend, the stock is meeting resistance along the 50-day moving average, and we are still operating under a death cross. And then there are the macroeconomic factors to consider. Increasing supply and falling demand don’t usually generate capital gains.
The only potential upside push might come on a seasonality basis. There is a period of strength for agricultural stocks that runs from August to December which might be of interests but it might be in your favour to look for another horse for that race.
Make it a profitable day and happy capitalism!