A 'Hold Your Nose' Buy From BMO

• Greif, Inc. (NYSE: GEF) shares have plummeted 39 percent year-to-date, and have been on a steady downtrend since end-May.
• BMO Capital Markets analyst Mark Wilde upgraded the rating for the company from Market Perform to Outperform, with a price target of $36.
• Citing the significant decline in the company’s shares, Wilde said that there now appears to be ample “margin of safety.”

Analyst Mark Wilde commented, “We have been underwhelmed by senior management and troubled by a steady exodus of GEF leaders over the past 5-6 years. That exodus is continuing.”

Wilde added that Greif had gone from being a “margin leader” 7-8 years back ago in its core rigid packaging business to now being a “woeful margin laggard.”

In the report BMO Capital Markets noted, “A steadily eroding stock price and falling credit ratings are sending a clear message that the status quo isn't working. Part of the solution is almost certainly managerial change.”

Wilde enumerated the other possible solutions as:
A tax efficient sale of Greif’s 250K/acres of southern timberland
Sale of the company’s containerboard business

The analyst believes that a “carefully executed strategy” of divesting non-core assets would force the core business to “sink or swim.”

Wilde believes that the company ought to be swimming, given its large market position in several geographies around the world. If the company fails to turn the situation around, it would become an attractive option for a private equity buyer. “Hold your nose and buy the stock at current levels,,” the report suggested.