|Shares Out. (in M):||234||P/E||0||0|
|Market Cap (in M):||8,183||P/FCF||0||0|
|Net Debt (in M):||5,307||EBIT||0||0|
Cost Curve Image Link: https://drive.google.com/open?id=0B-Xd0nRQYUtLQjZfbFdPbjdqZlk
Further clarity on pro forma numbers and tax issue, buyback plans and close of the OCI transaction
Improvement of fertiliser prices from current levels
|Entry||02/27/2016 07:47 AM|
Despite my best efforts and numerous re-drafting something has gone wrong with the formatting. Here is a Google drive link to the full write-up that looks a bit better: https://drive.google.com/open?id=0B-Xd0nRQYUtLeWpPNXRKRjRwemM
|Entry||04/19/2016 03:19 AM|
mike126 - apologies for just getting back to you. From what I've been reading that particular legislation was geared towards stopping the Pfizer transaction. CF mgmt has been guiding to low 20s tax rate for a while but I used 25% to be on the conservative side, which I think is still sustainable. They'll be in a more advantaged tax position being in NL, having other platforms in Europe as well as the Dubai trading platform. The inversion is of course part of the math but there are other upsides from the merger. I expect the stock to be volatile in the next few months and move with other fertiliser names. Part of the share price drop had to do with the tax law developments in the US and the other part was due to the seasonality of fertilier prices. If the OCI transaction closes CF is going to be a very different company by 2017, which I think people have a difficulty in getting their hands around. If it doesn't close, it can start to return a large chunk of capital at an attractive valuation following the close of the CHS transaction.
|Subject||Re: Re: Thoughts?|
|Entry||04/19/2016 02:05 PM|
CHS deal closed in feb. Im hoping CF reworks the OCI deal, if they do it at the same price they would be fools
|Subject||Re: Re: Re: Thoughts?|
|Entry||04/19/2016 03:04 PM|
Do they have flexibility to rework the deal? What are the outs?
|Subject||Re: Re: Re: Re: Thoughts?|
|Entry||04/20/2016 09:30 AM|
change in tax law is an out according to conditions of closing.
There shall have been no (i) change in Law, official interpretation thereof, or officially proposed action by the United States Internal Revenue Service or United States Department of Treasury (whether or not yet approved or effective) with respect to subject matters covered by Code Section 7874 or (ii) passage of any bill that would implement a change in applicable Laws by either the United States House of Representatives or the United States Senate with respect to subject matters covered by Code Section 7874, that, in either of case (i) or (ii), if finalized and made effective, in the opinion of Skadden or Cleary, would reasonably be expected to cause Holdco to be treated as a U.S. domestic corporation for U.S. federal Tax purposes.
|Entry||06/11/2016 04:17 AM|
Just a brief update on the deal that never happened. A few weeks ago CF mgmt announced that they are abandoning the planned deal with OCI, the Treasury's new rules were just too much to cope with and at the end of the day they couldn't come to a realistic number on valuation. A couple of questions in my mind: (i) will there be more M&A in the sector (will Yara for instance try for either OCI or again for CF), (ii) what's going to happen to the Wever asset - will OCI operate it on it's own or will CF/Agrium or someone else try to buy it. It's a very good asset in a highly desirable location so it woudln't surprise me if someone would go after it, (iii) CF's capital return - CF got $2.8bn from the CHS transaction that is currently sitting on the balance sheet. As capex is winding down, free cash flow will increase from 2017 onwards so there'll be ample opportunity to either buy back stock at the bottom/near bottom of the cycle or buy assets that'll add to future earning power. Mgmt has acted rationally so far so that gives me some comfort in terms of their intention.
|Entry||06/11/2016 11:56 AM|
LSB Industries (LXU) is divesting its Climate Control business and this deal is slated to close in August 2016. That would leave LXU as a pure play Chemicals/Ag company with very little debt, a brand new state of the art plant (El Dorado) with a current EV post divestiture of $600-$700mm, or roughly 4.5x run rate EBITDA.
LXU is likely to be a highly desirable candidate several months from now.
|Subject||Update & Coal Price|
|Entry||10/23/2016 06:11 AM|
Hi blmsvalue, thanks for this write up. I am curious to know what you are currently thinking on CF. Specifically, as coal price are rallying dramatically, this will surely make Chinese production costs increase materially. Albeit, North American natural gas price have increased as well. Net-net, if nitrogen price move up due to increase cost curve globally, I would still expect to see CF as a net beneficiary despite higher input cost for CF as well. Also, keen to hear your view on the recent debt downgrade and continued impart of RMB devaluation. Thanks.
|Subject||Re: Update & Coal Price|
|Entry||12/12/2016 07:23 AM|
Thanks for the question and sorry for just reacting. Your point is spot on about coal price increases and we have already seen the recovery of nitrogen prices recently (and most fertiliser prices to a broader extent). I question the sustainability in the short term as both domestic US and globaly production capacity is ramping up through 2017, with 2018 looking to be a more balanced year. RMB devaluation is an issue but what I'm seeing in China is capacity across both nitrogen and phosphate production coming out of the market (we have for example seen reduced utilisation rates as well as exports out of the country) for a number of reasons, such as (i) old/inefficient/high cost capacity, (ii) financial difficulties of domestic producers (many are small-scale), (iii) policy directive of capping the application of chemical fertiliser application in China and so on. So while RMB devaluation could have a negative impact (CF was unfortunately a proxy stock for this play this year) there is some increased rationalisation in the industry so perhaps there is some balance there. I'd expect more volatility through 2017 but gradual recovery in the fundamentals and share price from 2018 onwards. You'll also start seeing brokers update their valuations so that will hopefully add to sentiment.