Berenberg downgrades OCI, says divestment cycle nearing end
The Dutch chemicals firm has been spinning off major assets, including its fertilizer, methanol, and ammonia businesses, returning roughly $4.4 billion to investors so far. Following shareholder approval at its May annual meeting, OCI plans an additional $1 billion payout once the sale of its methanol unit to Methanex (NASDAQ:MEOH) closes, expected in the first half of 2025.
Berenberg expects that after completing the handover of its Texas Clean ammonia project to Woodside (OTC:WOPEY) Energy in late 2025, OCI's majority shareholder, the Sawiris family, could launch a tender offer for the remaining shares at a modest premium.
'The company is approaching a liquidation moment, with OCI's main shareholders willing to delist the shares,'' Berenberg wrote, adding that once the Methanol deal is finalised, management may also pursue a sale of its remaining European nitrogen assets. However, the brokerage noted that finding a buyer could be challenging as key players like Yara and Grupa Azoty are scaling back EU operations.
OCI's residual assets would consist of the nitrogen unit, which includes a 1.2 million tonne per annum ammonia terminal in Rotterdam and 1.6 million tonne ammonium nitrate capacity, and a 14.5% equity stake in Methanex.
Berenberg sees limited catalysts for further value creation, cutting its price target to €8.70 to reflect the May 7 distribution. It values the company based on a sum-of-the-parts analysis, factoring in expected transaction and restructuring costs of $300 million and estimating a partial recovery from contingent payments tied to the Fertiglobe deal.
The bank expects US regulatory approval of the Methanol sale, though with some remedies to address market concentration concerns.
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Monthly Index Performance Strong Gain Moderate Gain Moderate Loss Strong Loss Equities (At least 80% of the ETF assets) Strong Gain Gain Loss Strong Loss ELNs (Up to 20% of the ETF's assets) Loss Profit Profit Profit Overall Gain, but less than the market Gain, but less than the market Slight profit/slight loss Loss, but less than the market Author's analysis. What the ETFs need to do to demonstrate they work Before I throw charts at you, it's worth noting that the proof of the strategy working includes: The ETF should have a lower volatility than the index (measured here by the standard deviation of monthly returns). The ETFs should have relatively low maximum monthly drawdowns because passive investors usually do not want to lose a significant amount in any one month. The strategy should demonstrate a high coefficient of determination, or R^2, indicating that the independent variable (in this case, the benchmark index) is primarily responsible for determining the outcome. 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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy. High Yield and Low Stress: 2 Dividend ETFs That Are Built for Passive Income was originally published by The Motley Fool
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