Post by
Nawaralsaadi on Mar 28, 2014 12:57pm
A steal at those levels
Anyone who has taken the time to read the annual information form will notice that Canexus has an undeniable competitive advantage, with 70% to 90% of the company Sodium Chlorate variable costs dependent on electricity prices and the majority of the company production (80%) coming from North America’s lowest energy jurisdiction (Manitoba), this asset is extremely valuable and will continue to generate positive EBITDA for decades to come as long as humans use toilet paper!.
The company Chlor-Alkali facilities are comparably well located and energy cost advantaged, some of those facilitates have been producing since the 1950s and will continue to do so as long as we need to chlorine to disinfect the water, hydrochloric acid to produce oil and gas.
Those hammering the stock due to fears about NATO are sorely mistaken. The Board has taken all the right steps to address the shortcomings at NATO; they have fired the people responsible for the sub-par execution, and have put together a viable plan to finalize the project. The risk related to this projected is limited to the next two quarters, once this is behind us, this facility will start to contribute materially to cash flow, we are already 65% contracted on take or pay basis for 3 to 5 years, and additional capacity will be contracted shortly. NATO has tremendous future expansion potential and enjoys a clear strategic location at the CN/CP interval and is adjacent to some of the world largest bitumen mines.
This company is worth substantially more than its current stock price, and will likely trend back to the $7s level in the next few quarters, with each incremental positive step at NATO the gap between CUS value and its share price will close. The bad news is already priced in and the kitchen sink has been unveiled for all to see. As it has been said, there are no bad assets, there are only bad prices. At sub $5 CUS is the right asset at the right price.
Regards,
Nawar