TSX:CHE.DB.E - Post by User
Post by
incomedreamer11on Oct 01, 2021 9:30am
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Post# 33951521
Scotia comments
Scotia commentsChemtrade Logistics A Step in the Right Direction
OUR TAKE: Slightly Positive.
Chemtrade announced the sale of its potassium chloride and vaccine adjuvants businesses for US$155M (~C$197M) to Vertellus.
The assets, which had been classified as held for sale since Q2/19, are being divested to help the company de-lever the balance sheet. The US$155M selling price represents a 10.8x trailing EBITDA multiple, on US $14.3M of EBITDA.
We view the 10.8x multiple as fair to slightly low, given that these specialty chemical businesses typically trade at closer to 12x.
That said, CHE.un had targeted ~C$200M, which they achieved. Investors should welcome a 0.7x improvement to leverage, and the stock should be rewarded appropriately.
However, we believe leverage will still remain above 4.0x postdeal, which could hand-cuff the company's ability to fund meaningful growth that doesn't depend on commodity price improvements.
We remain a relative Sector Underperform, for now, but raise our PT to $7 to reflect: (1) the asset sale and use proceeds; and (2) improved investor confidence in the story.