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

Alternate Symbol(s): CGIFF | T.CHE.DB.F | T.CHE.DB.G | T.CHE.DB.H | T.CHE.UN

Chemicals Basic Materials

Chemtrade Logistics Income Fund is a Canada-based company that operates a diversified business providing industrial chemicals and services to customers in North America and around the world. The Company's segments include Sulphur and Water Chemicals (SWC), and Electrochemicals (EC). SWC segment markets, removes and/or produces merchant, Regen and sulphuric acid, sodium hydrosulphite, elemental sulphur, liquid sulphur dioxide, hydrogen sulphide, sodium bisulphite, and sulphides, and provides other processing services. This segment also manufactures and markets a variety of inorganic coagulants used in water treatment, including aluminum sulphate, and a number of specialty chemicals, including sodium nitrite. EC segment manufactures and markets sodium chlorate and chlor-alkali products including caustic soda, chlorine and HCl, largely for the pulp and paper, oil and gas and water treatment industries. These products are marketed primarily to North American and South American customers.

TSX:CHE.DB.E - Post by User

Chemtrade Logistics Income 6 50 Convertible Unsecured Subordinated Debentures

Bullboard Posts

Post by zalmonellaon Apr 16, 2018 1:08pm

203 Views

Post# 27891869

Curious myself about the low price

I've been watching the dividend rate rise and thinking to myself 'red flag' too, but I'm not seeing the kinds of risks that some posters are.

The enterprise is bigger as a result of the Canexus purchase, and is shutting down facilities of lower value. This should raise any ratio set against the value of the enterprise. Much of the earnings are in foreign currencies, and so are mostly protected against a decline in the $Cdn which I see is the only possible trajectory for the next two or three years. I don't think the net debt is too high especially when set against current revenues - that said, it's an industrial environment so revenues can fall 20% in a flash, and that will put Chemtrade into an earnings hole. However, they do have $200M in wkg capital to ride through such issues for a couple of quarters while they figure out the best strategy.

The debt-equity ratio is high at a little over 1, and there aren't many to compare to in Canada. Taking some of the paper companies like Fortress and Cascades, they're in a roughly similar situation. However, they pay smaller (if any) dividends. Bigger industrial companies aren't a fair comparison, but Nutrien is still instructive - it has a ratio of 0.5 and a share price to match. It also pays a smaller percentage of net income in dividends.

So I'm inclined to think there's nothing wrong with the company, and it's in no imminent danger of going broke even in a market downturn. I think the figures say that perhaps it has old equipment that needs upgrading, but still earns well, and has resilience even in a market downturn. The only think I think is out of line is the $100M+ in dividend payments. I think that's the only place where Chemtrade is out of step with its peers and vulnerable.

So I'm thinking the market is pricing in a dividend cut of 50% or more - and I think at $0.48 dividend is more than reasonable for a company this size. It's still a good company the way I'm looking at it. But I'm not going to step into it as long as the divvy is this high.

Bullboard Posts

Morning Market Outlook for April 30, 2024