TSX:CHE.DB.E - Post by User
Post by
CanSiamCypon Jan 27, 2022 11:01am
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Post# 34366593
BMO analyst update
BMO analyst updateLower 2022 Growth Than Expected; Still Cushion on Distribution
Bottom Line:
Lowering target price to $7.50 after disappointing 2022 initial guidance ($265-295M EBITDA, below $308M consensus) though Q4/2021 looks in-line. The implied payout ratio is still ~65-72% so the dividend/distribution looks attractive/safe but even with commodity prices such as caustic soda and sulphuric acid trading at very high levels, upside scenarios at CHE continue to not be reached. Our target price is ~6-6.5x 2022E EV/ EBITDA, implying an ~8% yield.
Key Points
2021 EBITDA expected in-line at or above the high-end of $245-260M guidance. We model $260M and consensus is $259M.
2022E EBITDA falls from $308M to $287M (we optimistically assume above the midpoint of guidance) as we lower margins in SPPC (sulphur/acid) and ElectroChem (chlor-alkali/chlorate) including assuming lower caustic price upside in 2022 than previously modeled. CHE is forecasting NE Asian caustic ASP of $440/t, up $150/t y/y but lower than we assumed. The once every two years turnaround is coming at North Van, though this is expected in Q2 (we were modeling Q3).
The $20-25M EBITDA miss is partially offset from a cash flow perspective by lower interest expense, maintenance capex and lease payments than we thought. These are expected to be $55-60M, $72-77M and $50-55M in 2022 vs. our prior expectations of ~$67M, ~$77M and ~$58M.
We assume the new long-term EBITDA range is $280-330M with management's guidance midpoint pointing to the low-end of this for 2022. This is considering management previously commented on a $300-350M normalized range before selling off ~$19M of earnings (vaccine adjuvants and specialty KCl businesses).
CHE is planning to combine the SPPC and WSSC (water treatment) segments into one segment to be named SWC (Sulphur and Water Chemicals). This will take place as of Q1/2022 results. This may reduce some transparency in modeling the businesses in our view.