Merrill Downgrades IRM to Sell, PT $25 | REITs Message Board Posts

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Msg  12143 of 12495  at  7/12/2019 11:19:40 AM  by

RJCogburn64


 In response to msg 12142 by  slim2483
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Re: Merrill Downgrades IRM to Sell, PT $25

 from WF yesterday....WF had just rated IRM "outperform"...
  downgrade that we understand is almost entirely due to softer paper prices pressuring IRM's business, which could make its FY2019 guidance unachievable. A few points to counter this report:
­ The re­sale of shredded paper is only ~3% of IRM's total revenues (roughly a third of its secure shredding revenues). It does have high EBITDA flow­through margins of ~85­90%, so is ~8­10% of total EBITDA. ­ While sorted office paper pricing industry­wide has been under significant pressure this year (we estimate it could be down 30­40% yr/yr), IRM expected a softening of paper pricing in its FY2019 guidance after a strong 2018 (higher paper prices in 2018 contributed ~100 bps to IRM's internal service revenue growth rate) ­ While it's unclear what level of paper price weakening IRM included in its FY2019 guidance, we believe it's likely that IRM, for a company of its size, has contractual protections which limit the downside risk to paper prices



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