National Post July 30/07Nicolas Van Praet
Financial Post
Monday, July 30, 2007
Sell Stelco, sell Stelco. That's the recommendation of RBC Capital Markets analyst Marie Millien, who argues investors should be taking advantage of the current strength in the Hamilton steel maker's share price to unload their positions.
The stock is trading in the range of $29.41 on the Toronto Stock Exchange, in part on what the analyst calls "rumours" in the media about Stelco Inc. (STE/TSX) being sold, which she says have succeeded in "whipping the share price into a frothing frenzy" at times.
Lest we all get caught up in more bubbling hysterics, Ms. Millien notes that she values Stelco in the range of $18.22 to $28.76 per share as a takeover candidate, setting a target in the mid-range of that valuation: $24.
"We believe this number is quite generous, but readily acknowledge that it may be different from the final realized value per Stelco share," Ms. Millien said in a note to clients dated July 26.
"The many grey areas in this valuation, the absence of a bidder, the uncertainties around the pension and OPEB liabilities, the operational leverage of Stelco, the sensitivity to currency moves, all add to risk, in our opinion. We do not anticipate attractive returns from current market prices."
Stelco reported a loss this past week of $41-million for its latest quarter, saying it is making progress in its turnaround but warning of slowdowns in some of its key market sectors.
nvanpraet@nationalpost.com
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