Ultrapar: An energy bet on Brazil

This Latin American conglomerate has seen 21 consecutive quarters of growth.

By TheStockAdvisors Mar 22, 2012 9:09AM

By Paul Goodwin, Cabot China & Emerging Markets Report

Ultrapar Participacoes SA (UGP) is a Brazilian conglomerate with deep roots in the country's energy industry.

It is the second largest fuel distributor in Brazil, and the largest LPG distributor, ethylene oxide producer and liquid bulk storage provider. It is thus positioned to benefit from the growth of Brazil and Latin America in general, and growing automobile ownership in particular.

The company's fuel distribution segment includes Ipiranga, the largest private fuel distributor in Brazil, which sells diesel, gasoline, natural gas for vehicles, fuel oil, kerosene and lubricants through its network of nearly 6,000 service stations.

Ipiranga took over Chevron's Texaco Brazilian operations in 2009 and acquired DNP, a northern Brazil fuel distributor in 2010.

Also in the fuel distribution area, Ultrapar's Ultragaz unit delivers LPG in bottles to more than 10 million homes for cooking and heating, and to over 40,000 bulk customers.

Ultrapar's Oxiteno division is Brazil's largest supplier of specialty chemicals like ethylene oxide and fatty alcohols. The company's expansion plans have included acquisitions in Mexico and Venezuela and the opening of commercial offices in many other Latin American countries.

The third division of Ultrapar is Ultracargo, a leader in liquid bulk storage for chemicals, corrosives, fuels and vegetable oil. Ultracargo's storage sites are strategically located in Brazilian ports and at railroad junctions.

Ipiranga provides more than 90% of Ultrapar's revenue, and the company's other divisions really represent ways to monetize its storage, distribution and byproducts businesses.

The company's expansion has come from a combination of organic growth and strategic acquisitions, leading to a string of positive annual earnings stretching back at least to 1997 and 21 consecutive quarters of EBITDA growth.

UGP made a strong run from its recession low of $3 a share in late 2008 to $19 in April 2011. But the stock traded under that high for the rest of 2011, building a powerful base for further gains.

The present rally began in January, and lifted the stock price to $23, with a couple of mild corrections along the way. The stock features a substantial 2.6% forward annual dividend yield.

With its strong network of Ipiranga locations providing both excellent supplementary retail opportunities and cross-selling opportunities for LPG, the company's strong brand profile and orderly expansion plans make for an attractive proposition. We rate the stock a buy.

Related articles:



Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
264 rated 2
485 rated 3
679 rated 4
640 rated 5
617 rated 6
632 rated 7
493 rated 8
276 rated 9
153 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.