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Re: NEWS/Seeking Alpha I looked yesterday and saw nothing beyond the Seeking Alpha article. http://seekingalpha.com/article/4028469-rentech-heads-win-tails-win-lot?auth_param=34vuh:1c4g1h4:d8b37231fa975c8ae9968e23456b7a17&uprof=46&utoken=5dba8a730cd129b0f3c6a39a7fddd311 SummaryTrue profits are obscured by non-economic amortization. Stock appears ugly on the outside. A very cheap way to bet on UAN units. This is a stock for patient investors. There has been a string of bad news lately from Rentech (NYSEMKT:RTK) and the share price has been nose-diving. I think the stock is very cheap. This is a classic case where bad assets are obstructing the view of the good assets. The bad asset being its industrial wood pellet plant. Seeking Alpha readers who follow CF industries (NYSE:CF) and/or CVR Partners (NYSE:UAN) might be interested in this stock since it seems to provide a cheap way to bet on a recovery of fertilizer prices, as you get about $35 million worth of UAN units pretty much for free at the current valuation. I will go over its various assets first, and then provide a valuation of the sum of the parts. Valuation: putting it all together I think the range of fair value estimates of Rentech shares are really wide due to the volatility of some of its assets. So I will begin with the most stable ones (and tack on debt and potential taxes later):
So putting that all together, the extremely pessimistic bear case valuation would be:
So if Industrial is a huge disaster and UAN units go to zero and Rentech fails to significantly cut overhead, equity holders will lose here. I consider this a very unlikely event. A slightly less pessimistic bear case would be:
This does not price in a recovery for UAN. Without a recovery in nitrogen fertilizer prices, you would still generate an 85% return. A possible bull case would be:
That would mean 385% upside. Another way to value this is by looking at future free cash flow yield. If we just take the most likely case (in my opinion):
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Msg # | Subject | Author | Recs | Date Posted |
72585 | Re: NEWS/Seeking Alpha | fac2601 | 0 | 12/7/2016 12:17:00 PM |