Credit Suisse Upgrades Fairmount Santrol Holdings (FMSA) to Outperform Amid Deleveraging
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Credit Suisse upgraded Fairmount Santrol Holdings (NYSE: FMSA) from Neutral to Outperform with a price target of $11.00 (from $7.00) following the deleveraging equity transaction and strong 3Q.
Analyst James Wicklund commented, "We are upgrading FMSA to Outperform following the deleveraging equity transaction and strong 3Q. We increase our target price to $11 from $7, implying 40% upside potential. When we initiated on the stock in September, the $1.1B of debt due by 2019 and our forecasts of cash flows indicated a dilutive event to raise cash was on the horizon since the $160M equity offering done in July was not enough. The recent ~$322M equity offering (including the green shoe, which we expect to be exercised) done in October takes a much bigger step in solving our issue. We expect part of the $490M cash on the balance sheet to be used to reduce a portion of the outstanding debt and to refinance the balance sometime in 2017 (better operating environment). Regardless, these issuances relieve pressure on the balance sheet and provide upside to our EV/EBITDA-based valuation."
Shares of Fairmount Santrol Holdings closed at $7.70 yesterday.
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