RE:RE:RE:Doom and Gloomers parading todayocean112 wrote: Hi Blue - I feel your pain (i'm in the same boat) - but my take - there is more plenty more upside at current prices. I just posted Scotia's report. I haven't a clue why TD has valued Chlor Alkali at $150M and suggested Doug would rather sell at this price and drive shareholder value lower than retain the asset (which would drive a higher shareholder value).
I think what scotia is suggesting makes sense - they dumped NATO to get more leverage with thier Chlor Alkali sale price....so Chlor Alkali may suprise on the upside to offset the losses on NATO.
I'm trying to see the wisdom of TD's analysis to remove my own selection bias - but again - their analysis just doesn't make sense to me.
This is less about recouping the NATO investment and more about determing value on future earnings (if NATO were to drag earnings down in 2015 and 2016 - total value of the company would have suffered). By dumping NATO, they eliminate the cashflow drag which is a positive, and potentially recoup losses with Chlor Alkali. Ideally, if Chlor Alkali sells at a decent price, liquidity issues go away - and they are left with two stable cash generators (worth way more than current price implies).
Chlor Alkali Analysis
Current 2015 EBITDA forecast = $22M
High Point (in 2012) = $50M
Midpoint - somewhere in the $30M range
Synergies from Acquirer = $5M - $12M = Midpoint = $8M
Taking the lower end of valuation = say $25M plus $8M of Synergies = $33M
Valuation (at 8.2x - industry average) = $33M x 8.2 = $270M
If they come close to this value - you can add $120M above and beyond TD's report......in other words - Scotia and CIBC seem closer to the mark than TD.
Also - volume on Friday was 6.2x average 30 day trading volume - heavy buying - if Scotia or CIBC are even close with thier price targets - there is still plenty of upside to recoup losses.
I don't see any further downside below $1.50 after the NATO announcement.
My two cents.
Ocean; I don’t know if you have access to the full TD report.
What TD has estimated is what they feel Superior Plus would be willing to pay for N. Van. in the current market. Potential acquires are always looking for bargains and Superior is a logical acquirer at the right price. Now that NATO has been “dumped” Canexus may not be quite as desperate to sell N. Van. and hold out for a decent price.
Further down in the report they detail their estimates for 2 scenarios;
Assuming North Vancouver Not Sold F2016E Adjusted EBITDA (mm) $119.1 EV/EBITDA Multiple 7.0x Enterprise Value (mm) $833.5 Less: Forecast Net Debt (mm) $521.0 Equity Value (mm) $312.5 Forecast Shares Outstanding (mm) 190.5 Equity Value per share $1.64 Assuming North Vancouver Sold for $150mm F2016E Adjusted EBITDA (mm) $90.5 EV/EBITDA Multiple 7.0x Enterprise Value (mm) $633.2 Less: Forecast Net Debt (mm) $371.2 Equity Value (mm) $262.0 Forecast Shares Outstanding (mm) 190.5 Equity Value per share $1.38 I agree that if they can’t get a decent price for N. Van. they are better off keeping it if they can.
If they keep it they still have a mountain of debt to work off which will take quite some time.
In my “opinion” in either scenario if Doug want’s to grow the Chemical Business in a meaningful way anytime soon they will have to do an Equity issue which depending on the numbers could be quite dilutive to the existing Shareholders.
If that actually happens it could provide an attractive re-entry point.
TD has consistently been more pessimistic than some of the other analysts. It will be interesting to see the CIBC update when they issue it.
Different Opinions Make a Market!
At the end of the day we have to make our decisions Right or Wrong based on our opinions and “Reap the Rewards” (Good or Bad)
Only time will tell if my decision to get out of CUS on Friday was Right or Wrong.
I will be closely watching how things develop and at some point I may decide to re-enter CUS.
As Always; Do Your Own Due Diligence; It’s Your Money !!