RE:CXRYes, a couple of comments.
If your assumption is that they are paying down maximum debt each year and assuming the blended rate of around 7%, as they pay down debt they pay less interest. The savings on the interest would not be insignificant (if you are talking about roughly 300 million at over 9% or so for the highest cost debt). Since they will invariably pay down the highest cost debt first, this effect will have a greater effect in the first few years. The effect of this on earnings can be added on TOP of the organic growth of 8% per year (if that is your assumption).
That said, the management team is not going to pay down all the debt. They will probably pay down debt aggressively until it is deemed to be a managable amount, which is probably much higher than you think. It would not be an efficient capital structure and would not maximize value for shareholders to pay down all the debt. After a certain point they would be better off using the capital elsewhere, likely for aquisitions given their global platform, as it would generate greater than the return they would get by saving on interest on the lowest cost debt. Also, once they have reduced the debt to a more managable amount and have demonstrated strong cash flows, they will likely refinance at a lower rate.
Just my two cents,
GLTA
Marcel
fdfd12 wrote:
forget about recognia, it says $18-$24.
In my opinion, there is GOOD and BAD with CXR.
THE GOOD
WIll do $6.50US which is $9CAN.
WIth a PE of 15, we get a TRUE price of $135CAN.
This is fair value TODAY.
THE BAD
WIth their 3.5B debt, they will only pay it off in 8 years (according to Andrew Mcreath).
Because of that, they will only have organic growth of 8% per year.
Sure they can buy small "tuck in acquisitions" as they have said, but a BIG MACHINE that CXR has been after buying AMCO, small tuck ins won't add much to the top or bottom line.
CONCLUSION:
CXR should be $135CAN and once there, will only move up about 10% until a good portion of the debt is paid off.
Then they can go after new MONSTERS.
any comments?