Methanex Corp T.MX

Alternate Symbol(s): MEOH

Chemicals Basic Materials

Methanex Corporation is a producer and supplier of methanol to international markets in North America, Asia Pacific, Europe and South America. The Company’s operations consist of the production and sale of methanol, a commodity chemical. It operates production sites in Canada, Chile, Egypt, New Zealand, Trinidad and Tobago and the United States. It has three plants in New Zealand, Motunui 1, Motunui 2 and Waitara Valley. Its Trinidad production site supplies methanol to all methanol markets. Its Chile production site supplies methanol to customers in South America and Asia Pacific, having two plants in Chile, Chile I and Chile IV. Its Egypt plant is located on the Mediterranean Sea and primarily supply methanol to the domestic and European market. Its plant in Medicine Hat, Alberta, supplies methanol to customers in North America. It also has interest in two methanol facilities in Beaumont, Texas, one of which also produces ammonia and methanol facility in Delfzijl, Netherlands.

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Methanex Corp

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Post by retiredcfon Feb 02, 2021 9:51am

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Post# 32445846

RBC

Their upside scenario target is US$60. GLTA

January 29, 2021

Methanex Corporation
A little light on gas; reducing price target to US$45

Our view: Despite the recent decline in Methanex shares, we believe investors should stay on the sidelines ahead of potentially weaker methanol prices and some uncertainty regarding the company’s next steps on the G3 development. We reduce our price target to US$45 (from US $50) to reflect the near-term uncertainty and lower forecast methanol production.

Key points:

Shortfall in gas supplies keeps production at subdued levels. The
company will have a total of three methanol facilities idled (Titan in
Trinidad, Waitara Valley in New Zealand, and Chile IV), representing ~24%
of the its production capacity, due to a lack of gas supply or the absence
of a long-term gas supply contract. Management estimates that 2021
production will be similar to 2020 at 6.6 million MT (down 13% from
2019), with lower volumes from Trinidad and New Zealand offset by higher volumes from Chile. Many oil and gas companies reduced capital budgets in 2020, and further upstream investments to develop gas fields may be needed to improve supply, which could take some time.

Key G3 decision this summer. To date, the company has incurred $365
million (plus $22 million of capitalized interest) on the Geismar 3 (G3)
development in the U.S., and it plans to spend ~$80 million over the
next nine months. After putting the $1.3–1.4 billion development on hold (temporary care and maintenance), management expects to make a decision this summer on next steps for the project (e.g., restart, defer, cancel, etc.). Given the costs incurred to date (sunk costs) and likely additional costs required to cancel the project, we believe Methanex will eventually move forward with the project either this summer or after another short deferral. Given the gas supply shortfall (lower production), it may benefit the company to have another facility (G3) in the U.S. where the gas supply is abundant. G3 would also support the company’s objective to grow methanol production in line with the market.

Revising estimates. We revise our 2021 and 2022 EBITDA estimate to $645 million and $616 million (from $592 million and $656 million), respectively, to mainly reflect IHS’s updated methanol price forecast, lower expected production volumes, and a higher discount rate to the company’s posted prices of 17% (new guidance for 2021) compared to 15% historically.

Reducing price target to US$45 (from US$50). Our US$45 PT is based on a 50% weighting on 7.0x (unchanged) our 2022E EBITDA, which is a 1.0x discount (to reflect increased uncertainty) to Methanex’s trading multiple on a forward basis observed when methanol prices have been at levels similar to our 2022 forecast, and a 50% weighting on 6.0x (unchanged, reflecting a 0.5x discount to the historical average) our 2022E EBITDA using the 10- year average realized methanol price and normalized volumes.