Mr. Isaacson cut Chemtrade Logistics Income Fund (CHE.UN-T) to a “underperform” recommendation from “sector perform” with it trading at historical multiple and seeing its dividend “unlikely to recover.”
“CHE.un is trading at a slight discount, although we think a steeper discount is warranted given demand weakness in EC is structural, plus continued concerns regarding leverage,” he said.
“We remain concerned that strong demand for chlorine could keep caustic soda under pressure; ultrapure and merchant acid volume remain issues.”
He cut his target for Chemtrade units to $7 per share, down from $7.50 and below the $9.06 average.
“Chemtrade is trading at 6.7 times 2022 estimated EBITDA, which is below its historical average of 7.6x forward EBITDA,” he said.
“Normally, we would suggest a company trade at trough-cycle multiples in this environment (i.e., a premium). However, the company’s continued struggle with high leverage warrants a below-average multiple, in our view.”