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

RE:Argh - I'm Back (for a few minutes anyway) - My 2 Cents

[6milli]

ocean112 wrote:

I can see I didn't miss much with all the Kherson bashing.    This is my first post since the quarterly numbers.  It was admittedly a distaster - and sheer genius - at the same time.  So I shorted everything at  $1.90 and am repurchasing most at $1.50 - so my average cost is about $2.20 - doable.

Now - why was this move sheer genius from Doug's part?  Well what happened was obvious -  he got a lot of low ball offers for NATO.  He knows what it's worth - and he's in the middle of hard ball negotiations.  He could have bowed to the pressure given that the stock price was tanking - but what does he do - drives right into the heart of the storm and gives a big "bite me" to the bidders.  Instead of selling NATO for nothing, he writes everything down, virtually eliminates the dividend - knowing full well the price would tank - and so it did.  He took that leverage away from "anonymous" who seems to be driving the price down daily.

But now - the bidders have little leverge now that a zero valuation of NATO is fully priced in.  To further squeeze the bidders for serious offers - Doug basically says - forget NATO - i'll put my chemical business up to take some of the balance sheet pressure off.

So what are the bidders doing - they now know Doug means business and will not budge on a firesale price of NATO.  Canexus has a better chance of getting a better multiple for thier Chlor Alkali plant given that their plant likely has multiple bidders.

Long and short - with multiple irons in the fire - (NATO and Chlor Alkalai) - the moment any sale is announced - this will bounce back to $2.50  which is approximately a 7.8x EV/EBITDA multiple.-

Value of NATO = $200M (which is the approximate cost for a buyer to build a similar facility - classic buy versus build decision - but buyers now get land, salt caverns, and manifest  for free). So $200M more or less is a price floor. 

Value of Chlor Alkali  = $250M (10x low end EBITDA of $25M)

Conservative estimates.

If you do the math at 7.8 EBITDA = the implied price target is $2.50 in the near term.  With some help from an expert whose input I value - these are the multi year price targets assuming a conservative 7.8x EBITDA multiple

Near Term (post sale - 3-5 months) = $2.50
2016 Target = $3.30
2017 Target = $3.70
2018 Target = $4.12
2019 Target = $4.58
2020 Target = $5.44

This assumes cash is used to pay down debt (cash will begin to build after payment of convertable end of this year - but after that - next payment is 2017).

So - if you can wait 5 years - this is a triple.

Best of luck




 

Ocean - Please walk through the numbers on how you get to a $250 M valuation for equity after taking into account a sale of NATO at $200 M and sale of Chlor-Alkali at $250M. Specifically, what pre-debt number are you using and what debt number do you use post- asset sales. Further, what is your estimate of EBITDA post-NATO and Chlor-Alkali sale, and please who how this translates into a 7.8x EV/EBITDA multiple. Thx.