CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

Great Deal - $300M in exchange for $1

[pm1231]

I'm rarely a fan of analyst reports - since they tend to base thier analysis on forecasted assumptions that may or may not hold (so your guess is as good as thiers if you do the analysis) - but this is Canexus is a CLASSIC value play 101 - and I found this excerpt from the CIBC research report rather interesting - at current prices - you are getting NATO (and subequent future cashflows) for FREE!

Valuation 

**(the discount rate used for Sodium Chlorate, Chlor - Alkali, and Brazil - seem a bit high given the steady cashflows and dominant market position ...- but I digress - for argument sake and will use the rates used by CIBC)

North American Sodium Chlorate 
Discount Rate - 8%
NPV - $586.1 Million
Per Share - $3.29

North American Chlor - Alkali 
Discount Rate - 10%
NPV - $460.9 Million
Per Share - $2.58

Brazil - 
Discount Rate - 8%
NPV - $162.1 Million
Per Share - $0.91

Transloading/Acid Blending
Discount Rate - 8%
NPV - $81.7 Million
Per Share - $0.46

Cash + Investments
Per Share - $0.01

Subtract - LT Debt -
Per Share - $2.49

Total - $4.76 per share (would be higher with lower discount rates for chemicals business)
Current Price - $4.68 per share

NATO 
Discount Rate - 12%
NPV - $303.3 Million
Per Share - $1.70

Cost of NATO to joe shareholder at current prices - $0.00

Continue to increase my position at these prices.  Even if more downside - this is far to cheap to pass up.....if you hold long.   (If your time horizon is less than a few months - this is a speculative buy for you and a 50/50 coin toss).  Can't help but not quote Buffet - "Be fearful when others are greedy, and greedy when others are fearful"....