Nomura Securities Upgrades Platform Specialty Products (PAH) to Buy; Deep Discount and Return to Growth
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Nomura Securities upgraded Platform Specialty Products (NYSE: PAH) from Neutral to Buy with a price target of $11.00 (from $12.00), citing a return of growth in earnings and deep valuation discount.
Analyst Aleksey Yefremov commented, "We upgrade PAH shares to Buy, having maintained Neutral since our initiation on 15 December, 2014. Our Buy thesis is focused on resumption of more sustainable growth in EBITDA in the range of 5-9% in 2017-18, with free cash flow growth enhanced by significant financial leverage of 6.8x net debt/EBITDA. While high leverage remains one of our key concerns, we also see it as a tailwind in the context of growing EBITDA. To be clear, PAH remains a high risk/high payoff investment, primarily because of current level of debt (median leverage for our coverage is 2.0x), which still needs to be reduced. We trim our target price by $1 to $11, which still implies 39% potential upside. Our target price is based on 6.8% avg. ’17-18E FCF yield, implying 9.5x EV/EBITDA for 2017E. In our upside scenarios we see PAH shares valued at ~$14-16."
Shares of Platform Specialty Products closed at $7.89 yesterday.
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