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

The Potential Future of Canexus

[BlueCollar51]

Canexus is currently in bad shape. There is no point in rehashing why (that has been done repeatedly). It Is What It Is!
 
At this point the only thing worth doing is to attempt to “Predict the Future”.
 
We have been told that the NATO and N. Vancouver assets are for sale so we may as well work with that.
 
2016 EBITDA Estimates from the CIBC Update 27 March 2015
 
North American Sodium Chlorate    $63m
North American Chloralkali               $22m
Bruderheim Transloading                 $  1m
Brazil                                                     $25m
 
Total                                                      $111m
 
** The TD (March 16) 2016 Total EBITDA estimate is $119.4m with different breakdowns.
 
If we assume that both the NA Chloralkali and Bruderheim assets have been sold by late 2015 or early 2016 for $500m (doable in my opinion) the “New Canexus” could look like this;
 
2016 CIBC EBITDA Estimate
 
North American Sodium Chlorate    $63m     (TD $68.2m)
Brazil                                                      $25m     (TD $31.5m)
 
Total                                                       $88m      (TD $99.7m)
 
 
DEBT
 
Credit Facility                                               $0   (possibly cash on the balance sheet)
Convertible Debentures (face value)    abt. $253m
 
TOTAL Debt/EBITDA (CIBC)                    2.9 (a bit high but very manageable)
 
If the market valued the “New Canexus” at 8 x $88m EBITDA (CIBC) = $704m market cap.
 
The current Share count is abt. 186m. If we use 200m to allow for some dilution the implied Share Price is $3.52 using the CIBC EBITDA estimates.
 
** Using the TD EBITDA estimates would have given better results. (SP $3.98)
** The CIBC 12 month SP target is $2.75 based on 1 x their NAV estimate with no asset sales.
** The TD 12 month midpoint SP target is $2.00 with no asset sales.
 
Obviously the above scenario is based on Assumptions, Estimates, and Speculation. (SOP when attempting to predict the future)
 
There is absolutely no guaranty that it will come to pass.
 
That said in my “Opinion” it is “Possible”…..
 
 
Personally the way I see it as a seriously underwater CUS shareholder I have 3 options;

1. Sell now and book a large loss. (not acceptable)
2. Wait it out and probably have a smaller loss. (worse things can happen)
3. Attempt to “Make Lemonade” from the CUS Lemon (HIGH RISK)

 
 
I don’t believe in “averaging down” for the sake of it but I have occasionally used option #3 in the past to “Salvage a Bad Investment” with varying degrees of success.
 
In my situation if I doubled my CUS position at the Friday close ($1.58) my ACB would be $2.97.
 
IF (the operative word) I actually do that and my “Speculative Scenario” pans out in a year or so I will have turned a potential major loss into a small win.
 
I am currently “contemplating” option #3. If I spend too much time “contemplating” and there is some positive news the SP could get away on me and my opportunity to “Snatch Victory From The Jaws Of Defeat” may slip through my fingers.
 
This DIY Investing stuff is tough, decisions, decisions, decisions…
 
Whatever decision I do make will be My Decision and I Will Own the Result!
 
As Always, Do Your Own Due Diligence; It’s Your Money !!
 
PS; “Constructive Criticism” will be appreciated, Bashing will be IGNORED

[ocean112]

Blue - my two cents.   Canexus will be in the penalty box for a while - perhaps through 2015 and into 2016.  Their book value is under a dollar so there is more downside risk after Q1.  However, they have valuable assets which are undervalued. If you can play the long game, ignore what the price is doing day to day and come back in a year or two, you should be fine and perhaps make

[1short1]

I agree with this assessment and will also hold. As was stated and I believe the assets are there. For all we know they could announce tomorrow Bruderheim sold.  Personally I believe we have a 1 year plus wait and I prefer wait to loss. As for the board I only have about 5 people left that I care to read.

[BlueCollar51]

ocean; Thanks’ for the comments. I have no intention to sell my CUS position. I am seriously considering buying more while the SP is under pressure. In my “speculative scenario” instead of using the highest EBITDA and ratio estimates I could dig up I attempted to be conservative.   The big “unknown” is how much Canexus will actually realise for the N. Van. and NATO assets and how long it will

[Calgaryrider]

blue, if anyone offered $250m for NATO today, trust me, they'd take it.   Offers are likely well below $200.  cash low negative, bro.

[ocean112]

I think its a question of timing.  They may be able to get book value ($292M for Chlor Alkalai and $250-$300M for NATO - but i'm guessing Doug will hold out - even into 2016 - to get the right price for the assets - I get the sense he won't want to dump these at the worst possible time if he doesn't have to - hence - more downside for the shares.  But if oil recovers into

[Kherson]

The Price is Wrong Actual Retail Price: $75 million... Looks like Ocean112 overbid on his showcase by a factor of 4! Kherson

[Kherson]

Another great call by the paid pumper! Kherson

[Kherson]

Ocean112 is singing a different tune now! Too funny... Kherson

[Calgaryrider]

blue,  respectfully, I think you're nuts by doubling down now. the CEO himself told you that The next 2 quarters are going to be worse for NATO than the last, and the last was BAD.   Throwing  good money after bad is NEVER a SAGE investment.   You should always be investing as if you've got nothing invested.   Though I agree that insolvency isn't really that

[BlueCollar51]

Calgaryrider; Thanks’ for the comments. If I do actually “double down” it won’t be all at once. I do understand the RISK and I am OK with it. I never “bet the farm” on anything. If my current CUS position went to zero it would be painful but far from fatal. I have been “Investing” (I am not a trader) for almost 30 years. I have had my share of losers but to date only One (1) total loss and I have

[Calgaryrider]

Blue, I work in one of the big towers downtown (Cowtown) and I can tell you, every tom, richard and harry has their own opinion about where oil is going....and you're right, nobody knows. Everyone tries to be an analyst on the matter, but, frankly, there is no economic analysis to do. Oil does not and has never traded on supply & demand fundamentals.  OPEC and other producers

[BlueCollar51]

Calgaryrider; The way I see it is that the North American Oil Industry is driven by Price/Economics which in turn are driven by the Global Market which is largely Geopolitical.   What most people don’t understand is that Saudi Arabia is basically Owned & Operated by the “House of Saud” (a large family).   The “House of Saud” have a lot of enemies both inside and outside of Saudi

[ocean112]

Though I agree that insolvency isn't really that plausible in today's market, it IS possible if oil goes down to $30.  Really?  So CUS has 20% exposure to oil in thier HCL business, and NATO is already valued at zero.   If EBITDA contribution from NATO is negative $12M for 2015 - then they run the risk of hitting thier debt covenant should the banks choose to call thier

[Calgaryrider]

If they are on the verge of breaking covenants already, can they afford to have NATO,run into the ditch any more?   Also, chemical revenues are also linked to drilling activity...look it up.