EquityResearch30June2020COREBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ThisresearchreporthasbeenpreparedinwholeorinpartbyequityresearchanalystsbasedoutsidetheUSwhoarenotregistered/qualifiedasresearchanalystswithFINRA.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE58.Restricted-InternalAmericasAgribusinessFromFarmtoConsumer–InitiatingADMandBGatOWWeareinitiatingcoverageonADMandBGwithbothstocksratedOverweight:Globalgrainprocessors,inourview,arewellpositionedtocapturefuturegrowth,asdemandforagriculturalproductsincreasesonthebackofagrowingpopulation.ADMandBGbothsourcerawmaterialsfromthemostproductiveregions(NorthandSouthAmerica),whilehavinganextensivegloballogisticsnetwork,allowingbothcompaniestoconnectfarmerstoconsumers.Whiletheindustryisexposedtoseveralrisks,whichshouldnotbeunderestimated,webelievetheveryparticularinvestmentthesisofADMandBGcancreateshareholdervalue.ADM(OW,$52pricetarget)–Deliveringonitstransitionfromacommoditycompanytoavalue-addednutritioncompany:ADM,inourview,hastakentherightstepsinthepast,reshufflingitsportfolioandaddingthevalue-addednutritionbusinesstoitsportfolio.Thesegmentnotonlyfitswellduetoverticalintegration,itshouldalsoallowADMtogrowsalesathigherrateswhileexpandingconsolidatedmargins,asthebusinesshasanintrinsicallyhigherearningspower.Althoughshort-termrisksrelatedtotrade,COVID-19,andweather,amongothers,canhaveanimpactonresults,weseeinthemediumtermahigherlevelofprofitability,whichdrivesour$52pricetarget.BG(OW,$55pricetarget)–Stillintheearlystagesofitstransitionstory:Withover200yearsofhistory,BGveryrecentlyembarkedonitstransformationjourney.Inearly2019,BGputanewandmotivatedmanagementteaminplacetoleadthetransition,andweexpectthecompanytofurtherdeliverin2020onthee...
