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

RE:RE:RE:Doom and Gloomers parading today

[Kherson]

ocean112 wrote: Hi Blue - I feel your pain (i'm in the same boat) - but my take - there is more plenty more upside at current prices.   I just posted Scotia's report.  I haven't a clue why TD has valued Chlor Alkali at $150M and suggested Doug would rather sell at this price and drive shareholder value lower than retain the asset (which would drive a higher shareholder value).  

I think what scotia is suggesting makes sense - they dumped NATO to get more leverage with thier Chlor Alkali sale price....so Chlor Alkali may suprise on the upside to offset the losses on NATO.   

I'm trying to see the wisdom of TD's analysis to remove my own selection bias - but again - their analysis just doesn't make sense to me.  

This is less about recouping the NATO investment and more about determing value on future earnings (if NATO were to drag earnings down in 2015 and 2016 - total value of the company would have suffered).  By dumping NATO, they eliminate the cashflow drag which is a positive, and potentially recoup losses with Chlor Alkali.  Ideally, if Chlor Alkali sells at a decent price, liquidity issues go away - and they are left with two stable cash generators (worth way more than current price implies). 

Chlor Alkali Analysis

Current 2015 EBITDA forecast = $22M
High Point (in 2012) = $50M

Midpoint - somewhere in the $30M range

Synergies from Acquirer = $5M - $12M = Midpoint = $8M

Taking the lower end of valuation = say $25M plus $8M of Synergies = $33M

Valuation (at 8.2x - industry average) = $33M x 8.2 = $270M

If they come close to this value - you can add $120M above and beyond TD's report......in other words - Scotia and CIBC seem closer to the mark than TD.

Also - volume on Friday was 6.2x average 30 day trading volume - heavy buying - if Scotia or CIBC are even close with thier price targets - there is still plenty of upside to recoup losses.

I don't see any further downside below $1.50 after the NATO announcement.

My two cents.