GREY:ARGEF - Post by User
Comment by
skyyvodkaon Nov 12, 2014 3:58pm
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Post# 23121872
RE:RE:RE:RE:Pope and Company: Buy rating and $2.10 target for Argex
RE:RE:RE:RE:Pope and Company: Buy rating and $2.10 target for ArgexAssuming the Valleyfield plant is financed with 75% debt at a coupon of 9%, the debt level is set at US$225 million. The company is to issue the remainder cost in shares with an assumed share price of $0.60 to increase the share count by 121 million shares. Total shares outstanding on a fully diluted basis would rise to 277 million shares post financing. Using a Price-to-Earnings valuation approach we compute the company’s forward earnings for 2017 based on forward EBITDA (2018) of $122 million. Our calculation results in a forward EPS of $0.24 in 2017. Using a 12x multiple our implied price in 2017 is $2.92, and $2.08 in 2014, using a discount rate of 12%. Carrying a similar calculation using EV-to-EBITDA approach we arrive at an enterprise value of $973 million using EV/EBITDA multiple of 8x. After deducting net debt, the implied equity value becomes $797 million or $2.87 per share in 2017. The EV-to-EBITDA method gives a share value discounted to 2014 at $2.04.
It is a no-brainer. BUY!!