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

RE:RE:Plains Midstream Canada - Placement

[ocean112]

well - NATO is definately worth more than the $0-$40M the market is attributing to the facility (depending on which valuation assumptions you use). Personally speaking - it's mind blowing how irrational the market is with this stock.  I've gobbled up a sizeable position just based on my valuation of the parts.

Yes - there are headwinds - but the market is implying I could buy NATO with a dime given the current share price.   To the right buyer - (like a plains or cenovus) - NATO is far more valuable in thier hands than what Canexus could do on thier own with it, and they could generate a great deal more cashflow than Canexus which is why I believe the market will do a 180 when the price is announced for NATO.   This is what a midstream could do with NATO with proper management:

at 10.5 trains - $50 M EBITDA
at 14 trains - $78M EBITDA
Add $10M - Salt Caverns/Storage - $88M EBITDA
Add $10 M - Manifest Full Capacity - $98M EBITDA
Add $2M Synergies - $100M EBITDA

At 5x EBITDA - you're already at $500M.

Perhaps the above numbers are aggressive - but most analysts value NATO at 8x to 10x EBITDA....time will tell but cost recovery at a minimum doesn't seem to be too far out of the question with 9-10 bidders, despite what the market feels. 

....long and short (and to your point) - NATO is irrationally undervalued. I was lucky to pick up a chunk at $2.50.  I'm optimisitc and holding long my position until after the announcment next month.