CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

RE:RE:RE:RE:RE:Violation of the External Communication Policy

[ocean112]

One more comment - what is the market currently pricing NATO at?

Sodium Chlorate - $60M EBITDA
HCL - $35M EBITDA
Brazil - $25M EBITDA

(above represents conservative long-term EBITDA)

Total - $120M

FORGET THE FACT: 

a) Sodium Chlorate is the largest facility in the world, a strategic competitive advantage as the lowest cost producer given low electricy rates.  Nope - lets just give them an average industry multiple similar to other chemicals businesses - around 8.5 to be conservative and give zero premium to this strategic differentiator and assume Doug would be crazy enough to dump the Sodium Chlorate business at this multiple. 

b) Forget the fact Brazil is a 27 year agreement with 10 year extension option - so basically another 22 years of $24M EBITDA - nope - lets give this also an 8.5x multiple - just to be really stupid conservative.  Assuming a buyer would pay 8.5x and get 14 years worth of free $24M EBITIDA or $336M of free cashflow - because Doug is not smart and is willing to give it away).

c) For argument sake - lets make HCL 8.5 as well

Nebt Debt - $550M

So - $120 EBITDA x 8.5 = $1020M less $550M Debt = $470M divided by 184M shares =
$2.55/share - current intrinsic value. 

Today's share price = $2.38.

Therefore - the market is basically saying - CUS WOULD HAVE TO PAY  (2.55-2.38)*184M shares = $31.2 M - to beg someone to take NATO off thier hands.  This is what the market is saying.  Yes - NATO is worth NEGATIVE $31.2M.

So - if you believe that is rational - you need to sell your shares tomorrow.  If you believe - it's just a matter of time before prices actually correct itself to intrinsic value - hold or buy up shares at these prices.  

If I've already argued in a previous post that CUS knows the value of NATO and would not be so stupid to sell an asset for nothing just to "realign the business towards chemicals".  Assuming it will not sell NATO below $400M (because it would barely put a dent in debt while allowing to buy back shares and make an acquisition) - and a midstream would value NATO at it's midpoint of potential value ($372 - $558M) = $465M

Still less than what they paid for it - but assuming this would be reasonable given the environment and the fact $465 allows them to pay off debt, buy back shares, and/or buy another accretive asset for growth. 

THEN

$465M/184M shares = $2.52 - value of NATO per share.

Current NATO VALUE =  - $0.32 per share

Add this to the current share price - or it's intrinsic value - and you have $4.9 - $5.07 per share.  That's a 113% percent potential gain assuming an announcement is tomorrow if prices correct towards intrinsic value.

If you want to gamble the potential 113% upside for say 5 to 10% of potential downside (assuming there is more downside to be had) at which you can buy - that is your perrogative.

For a rational investor - the risk/reward (113% upside versus 10% downside) is a no brainer. And yet - there are still people who will sell at these levels because pros know - there are always chumps who can't handle the pressure of price swings and dump stocks at the worst possible time. 

Scotia, CIBC and even TD (although they use a stupid low multiple) back up this analysis. 

Ok - now - all the "bashers" - start your bashing.....(or better yet - go back to your grade 8 investment club and come back when you learn how to do some basic analysis and play the market).