RBCDid anybody post about the rbc analyst report after the conference call? They are calling it outperform and speculative, with a target of 75 cents. when i saw that, i was surprised as it seems low...but that target does not include the potash. It is cash, forestry and energy, so even without the potash the still see 75 cents, and with the potash another 80 cents to 1.90. However, all of the catalysts RBC mentions relate to potash.
That means that, in a sense, their target is the highest in recent times. The report is interesting in its conservative perspective. They are not counting the financing eggs before they are hatched, as they (more than once) refer to the failure of financing and the potential sale of the potash project. Apparently MAA mentioned this possibility during the cc, but i dont remember that. Anyways, this lack of conviction about successfully getting financed and raising equity reinforces my thinking that even though we have recently doubled, that doubling is peanuts. Large institutions like RBC are still doubtful, meaning that when that doubt is overcome (which might happen in stages), there will be much more upside.
I can put that sentiment another way. If investing institutions like rbc are being so conservative that they are not even including potash in their calcuations, then that means that when/if MAA delivers, the upside is more than i had previously thought.
RBC also mentions that MAA will likely need 130-180 million. Didnt MAA actually reduce their projection to 110?
Regarding potash, they assume $750 price for potash, with 20% discount rate.
Exhibit 3: Sensitivity of Potash Project Valuation to Discount Rate Assumption
Unlevered Equity Discount rate 10% 15% 16% 17% 18% 19% 20%
Potash Valuation per MAA share $3.90 $1.86 $1.62 $1.38 $1.20 1.02 $0.84
In analyzing the potential of the potash project, they "assumed that MagIndustries would issue $200 million of equity at the MagPotash subsidiary level at $2.50 per MagPotash share (C$3.00/share) resulting in 176 million total MagPotash shares outstanding....Based on our assumptions, MagIndustries would hold an ownership interest in the potash project of 54.5%. Exhibit 5 highlights the sensitivity of our potash valuation to changes in our MagPotash equity issuance assumptions based on an assumed unlevered equity discount rate of 20%."
Exhibit 5: Sensitivity of Potash Value per MAA Share to MagPotash Equity Issuance Assumptions
Issuance Price per MagPotash Share $2.00 $2.50 $3.00 $3.50 $4.00 $4.50
Potash Valuation per MAA share C$0.78 C$0.84 C$0.90 C$0.96 C$1.02 C$1.08
MAA interest in MagPotash 49.0% 54.5% 59.0% 62.7% 65.8% 68.4%