Opinions
Andrew Guy, CFA
Methanex Corp
MX-T
BUY
Sep 04, 2009
Stock price when the opinion was issued
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As the largest supplier of methanol to international markets, we select MX as a TOP PICK. The company just announced the first bio-methanol marine vessel voyage that opens the door to low-emission marine transport. It trades at 9x earnings and 1.5x book value. It has been some cash reserves to prudently retire debt and buy back shares. We recommend placing a stop-loss at $51, looking to achieve $78 — upside potential over 21%. Yield 1.0%
(Analysts’ price target is $78.69)We reiterate MX, the largest supplier of methanol to international markets, as a TOP PICK. The company just released earnings, beating analyst expectations by 20%. Production in the quarter was slowed due to extended turnaround times in several key regions, but this should be resolved shortly. It trades at 13x earnings and 1.5x book value. It has used some cash reserves to prudently retire debt and buy back shares. We recommend maintaining a stop-loss at $51, looking to achieve $78 — upside potential over 30%. Yield 1.0%
(Analysts’ price target is $78.17)World's largest producer of Methanol (used in Gasoline blending/industrial applications). Canadian company with capacity to produce 10 million tones across the globe. Cyclical commodity that varies with China demand. Earnings $7/shrae in 2018, lost $1.62 in 2020, will earn ~$6.50/share in 2024. Would be a good trade, or something to buy on the dip. Hard to predict outlook of the business. ~1.5% dividend rate, which isn't high - can also be a risky dividend with cyclical business. Would not recommend investing for the long term.
Our PAST TOP PICK with MX has triggered its stop at $64. To remain disciplined, we recommend covering the position at this time. Combined with our previous recommendations, this will result in a net investment gain of 3%.
MX has been hit hard with economic and tariff concerns, and now trades at only 8X earnings, with a 2.05% dividend. It is somewhat leveraged, but consensus still calls for earnings growth in the next two years. We think it has good bounce potential over the next few years. We would be OK slowly accumulating this. We would see no rush, and it is going to take a better market for it to perform, but we do think this happens over time.
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