CIBC upgradesSuperior Plus Corp. (CIBC)
Raising To SP - Guidance Maintained, ERCO Issues Resolved
SPB reported Q1/11 IFRS EBITDA of $95.1 million versus our estimate of $74.2
million. The main variance was stronger-than-expected results from Energy
Services. Guidance was maintained from the previous quarter, ending a two-year
streak of lower guidance each quarter.
Sodium chlorate gross margins fell as SPB was required to purchase product on
the market to cover for its force majeure event at its Buckingham plant. The
problem has been resolved and we expect strong growth from the Specialty
Chemicals division going forward.
Energy Services was a beat in Q1/11 as colder weather helped boost Canadian
propane distribution volumes. Meanwhile, Construction Products continues to be
sluggish due to weakness in residential construction, but may be bottoming out
as the U.S. housing market begins to recover.
We adjust our estimates to account for continued strong growth in Specialty
Chemicals and a modest recovery in Construction Products. We also raise SPB
from Sector Underperformer to Sector Performer as of May 6th, and our price
target from $11 to $12.00, reflecting a 7x EV/EBITDA multiple.