Chemtrade Logistics Income 6 50 Convertible Unsecured Subordinated Debentures T.CHE.DB.E

BMO analyst flash update

[CanSiamCyp]

Just Another One of Those Quarters for CHE

Bottom Line:
 

Large Q3 miss (water the only bright spot) with 2020E EBITDA seemingly ~$275M

and some 2021 guidance commentary implying to us 2021 EBITDA ~$300M, implying

a 75-80% 2021E payout ratio. There's sizable upside if CHE can recover earnings (to

the high end of "normalized" ~$300-350M earnings), and right the ship, but finding

conviction amid high payout ratios is difficult (it may have to start with sharp caustic

recovery). Our target price is ~6x 2021E EV/EBITDA

Adj. Q3 EBITDA of $65M (down ~28% y/y, ~14% q/q) missed $75M consensus

(BMO: $76M estimate). Distributable cash after maintenance capex was $12.1M ($0.13/

unit), a ~115% payout.
 

[Kherson]

115% payout ratio for the Quarter? Wow... Chemtrade will simply have to cut the distribution yet again! Kherson

[Fantome]

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[Capharnaum]

While I think it was a bad quarter, they did more maintenance capex this quarter than in Q1 and Q2. They also had $4M in costs issuing the new debentures which are non recurring costs. Excluding the costs related to the new debentures and with an averaged maintenance capex cost (total maintenance capex for Q1+Q2+Q3 / 3), the payout would have been 71%. However, with two maintenance shutdowns

[Fantome]

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[Capharnaum]

Well, I don't hold shares right now for several reasons (including their current balance sheet and that their quarterly performance has been on the decline). I just don't think that using ponctual charges combined with a quarterly view is a good way to calculate the payout. Ultimately, if the yearly payout is 70%, it's not really important that quarterly it goes 40% - 115% - 115% - 40

[Kherson]

I have been saying for at least a couple of years now that Chemtrade is in trouble financially. My basic argument was that Chemtrade overpaid for the Canexus acquisition! I also still believe that Mark's only reason for pulling the trigger on Canexus was so that he could justify receiving the $5 million Long Term Incentive Bonus! Kherson

[Fantome]

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[Kherson]

[Reittrader]

Did you forget we are in the middle of a pandamic? The income and profitt will be back again, just wait and see.

[Fantome]

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