Archer Daniels Midland

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Archer Daniels Midland

• Group Four
• Alex Earl, David Holzman, John Krenger and Kalem
  Kopf

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Investment Thesis

• Strong cash balance of 3 billion
• Product diversity
• Global expansion and technological advancements
• Size and vertical integration

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Company Overview
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Oilseed Processing

• Soybeans, cotton, sunflower seeds, canola,
  peanuts and flaxseed
• Crushed into vegetable oils and protein meals
• Industrial Products and refined oil

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Corn Processing

• Worlds largest corn processor
• Manufacturing of corn sweetener, starches,
  dextrose and syrups used in FB industry
• Bio-Products of ethanol and other industrial
  products

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Agricultural Services

• Manages extensive network of commodity inventory,
  transportation and supplier and buyers
• Sourcing and merchandising of commodities
• Market Leader in IT

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Other Food Feed Ingredients

• Include other processing operations and financial
  services such as
• Banking, futures options, insurance, pvt.
  equity
• Wheat cocoa

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Industry Analysis

• Farm products industry
• Sub Industries Agricultural chemical, meat
  product and processed and packaged goods
• Outlook for industry is less dire than many other
  industries
• Biggest concern is volatility in commodity
  markets
• Obama and ethanol

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Key Growth Drivers

• Corn Prices
• Demand for biofuels
• Advancements in biofuel production
• Global Demand for crops
• Market Dislocation
• Expansion into South America and Asia

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Bear Case

• Less farm subsidies
• Increased foreign competition
• Increases in corn prices
• Losses on financial hedges

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Bull Case

• Capitalize on Market Dislocations
• Cash available for acquisitions
• Early rebound of global markets
• New legislation increasing biofuel consumption
• Continuing stock buyback program

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Relative Valuation

• Competitors include Bunge (BG), Flowers Food
  (FLO), Fresh Del Monte Produce (FDP), Hormel
  Foods (HRL), and Monsanto (MON)

• Projections
• Current Price -25.83
• P/E -51.59
• TEV/EBITDA - 45.63

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DCF Valuation

• Current Price 25.83
• Price Range 32.51- 35.90
• Undervalued 26-39
• Assumptions
• Lower revenue growth, flat operating margins,
  heavy 2009 Capex, and positive 2009 NWC

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APM Portfolio Incorporation

• Place a limit buy order for 750 shares _at_ 25.83
• Cost 19,373
• 2.3 of portfolio
• Beta of 0.94
• Increased diversification from customer mix

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QA