Description

My analysis will be brief and will likely result in a sub 1 rating but who cares.  The crazier things get arguably less detailed fundamental analysis matters.

In a stock market of insane moves Huntsman stands out in a bucket of most baffling to me.  I get it, it is a chemical company driven by global GDP and anyone willing to take a stab at near term global GDP should have their head examined.  I mostly understand all of the near term, medium term, etc risks.  One thing I can unequivocally state (which probably means I will be regretting the day I write this) is that Huntsman has a balance sheet that can weather any storm other than what I will call the Waterworld scenario.

Big picture: recently sold their most cyclical, lowish margin business for 8x EBITDA using the majority of proceeds to pay down debt.  The deal closed at the beginning of this year so decrease in debt isn't reflected in Bloomberg, etc.  Current debt is ~$1.1 bn with cash of ~$400 mm for net debt of ~$700 mm.  Current estimates are for $880 mm in 2020 EBITDA, yeah not going to happen.  Let's haircut it to $600 mm?  So around 1x leverage?

Huntsman owns 52.1 mm shares of Venator (VNTR), the titianium dioxide business they spun a few years ago.  Using current price of $2.25 generates ~$120 mm of value not including the tax benefit they would receive if they sold at these levels.

Current EV of ~$4.3 bn, subtracting $120 mm VNTR stake produces adjusted EV of $4.2 bn.  Near term who knows but in some sense who cares.  My big assumption is that we will get through this at some point, Huntsman has the balance sheet to withstand almost anything and you get paid ~4% while you wait.  Previous troughs have been in the 6x EBITDA range although the company was much different and more highly levered at those times.  We are below trough in my humble opinion.

Taking a more aggressive stance.  Call it serendipity but Huntsman sold their worst business at a very opportune time and Management is ready and has the firepower to pounce when there are potentially many assets for sale at extremely attractive prices.

Bring on the hate!

Catalyst

No idea