RE:RE:RE:Violation of the External Communication PolicyCalgaryrider wrote: Normally, these road shows are not consequential to the investor. Not at all. They deliver old news and try and build steam with it. That's what was on paper (the presentation/slide deck). So, normally, I don't care about when stuff is posted.....the timeliness is not consequental.
However, the words that Dougie spoke and the questions he answered WERE very material in that they provided new information. If you're even pretending to be a CUS investor (like me, no don't own a penny yet), listen to every word Dougie said very clearly.
Dougie clearly said:
- CUS messed up.
- He doesn't see CUS getting a return anywhere near the $525M in Capital invested on NATO. They "might" have got that at $100 oil. Not even close in this environment.
- Despite this, they are considering every offer to help them shed the NATO asset. The majority of interested suitors are midstream companies. Only one interested E&P company exists. That might be Imperial (that's my guess). Others simply don't have the balance sheet that they do.
- Keeping NATO is clearly NOT the long-term desire of the company. If they can shed it, they will.
- They could sell chemical-based assets, but CUS has no real desire to do so unless they are forced to do so. Their long-term want is to shed NATO and just get back to be a chemicals business. He was very clear that NATO has been a bad chapter in CUS's history and, if he can get anything other than a bag of pucks for it, he's willing to wring his hands of it and move on.
All this stuff is highly material, so the audio portion of this really did matter.
It is a clear indication that CUS is willing to take a bath on NATO and just to get back to basics.
I wouldn't be surprised if CUS is required to do a massive write-down of the NATO asset on the annual (2014) books as part of their Q4 report. They essentially HAVE TO based on what Dougie said. This will make the company's EPS look just so terrible. [An accounting trick.] Probably drop the stock 30%-50% and allow me to buy at $1.50.
Those already invested, if you're thinking of averaging down to save your bacon, I suggest you still wait. You have nothing to lose. There is more pain around the bend in the tracks.
PRESENTATION DISCLOSURE
I understand the general frustration; however, I don't think there was anything material disclosed in the presentation. This means that there was nothing said during the conference presentation that would cause a rational investor to make a significant change in their investment thesis on the stock. Perhaps you have a disagreement with what the investment industry classifies as "material" generally, but the way it works is the way it works and that is on mosaic theory and that is what prevails. If you disagree, that's more of a philosophical argument and/or one you can have with politicians, lawmakers and regulators - but to be perfectly honest, it has no relevance here.
ISSUES WITH CALGARYRIDERS COMMENT
"CUS messed up" - this is not new news
"He doesn't see CUS getting a return anywhere near the $525M in Capital invested on NATO" - What he said is that is really tough number to get to. He did not say they won't get anywhere near close to it in this environment. What he said is that the valuation is not what it cost Canexus to build but what it is worth to a potential buyer. He did not say $525M, he did not say $500M, or $450M or $400M, nor did he say a bag of pucks.
" He was very clear that NATO has been a bad chapter in CUS's history and, if he can get anything other than a bag of pucks for it, he's willing to wring his hands of it and move on"
As described above, he did not say what he's willing to sell NATO for. $525M what they paid would be nice in the current environment. But what if the best deal they can get is $450M? $400M? Would they sell it? Yes, no, maybe? What numbers are they looking for before they decide they are not receiving full value? This is unclear. If they get an offer of $400M they might not accept it because there is no urgent need to sell the asset. But I don't know, maybe they would accept $400M. Maybe they are only getting offers of $300M. I don't know. But CUS can operate NATO for another 6, 12, 18 months and wait until the market recovers somewhat to receive a better value for their asset. The terminal is cash flow positive. At full capacity after expansion, they would acheive $78M EBITDA/year (requires $25M extra capital). At a very conservative multiple of 6x EBITDA this would be worth $78M * 6 - $25M = $443M. I'm not saying you should value this asset at 6x, this is just for illustration.
"I wouldn't be surprised if CUS is required to
do a massive write-down of the NATO asset on the annual (2014) books as part of their Q4 report. They essentially HAVE TO based on what Dougie said. This will make the company's EPS look just so terrible. [An accounting trick.] Probably drop the stock 30%-50% and allow me to buy at $1.50."
It doesn't matter if they do a write down or not, the market has already made a significant writedown on NATO. This is why the market has pouned CUS stock so hard (from $9 2013, to $7.50 start of 2014, to $5 August 2014, to sub-$2.50 today. In order to get $1.50 valuation for shares, you would need to value the chemicals business at a low EBITDA projection and depressed EBITDA multiple of 7.5x EV/EBITDA, and assume NATO is valued at $250M. If you think NATO is only worth $250M and that the chemicals business is in trouble, then don't but the stock it could go to $1.50