UPDATE: Global Hunter Securities Starts KMG Chemicals (KMG) at Neutral

(Updated - June 29, 2015 9:47 AM EDT)

Global Hunter Securities initiated coverage on KMG Chemicals (NYSE: KMG) with a Neutral rating and a price target of $29. Analyst Michael Harrison views shares as fairly valued.

"KMG is well into its next phase following the divestiture of its lowmargin creosote distribution business and acquisition of an interesting industrial lubricants business. Val-Tex represents a small piece of revenue for now, but we believe KMG can leverage the top and bottom lines by integrating it into its global infrastructure to drive operating efficiency and geographic expansion. The Electronic Chemicals segment is benefiting from solid semiconductor demand and a position to serve higher-end chip production with higher-purity (and higher-margin) chemicals. The company is also leveraging recent cost-reduction actions and should see longer-term benefits from an SAP implementation (provided it does not disrupt the business near term)," said Harrison.

"We are initiating coverage with a Neutral rating and $29 price target. This reflects our view that shares are currently appropriately valued; we acknowledge future acquisitions are a key element of the story and make the company more attractive on a long-term basis. Our target represents 8.5x our FTM EBITDA estimate (starting with FQ4:16), about in line with current valuation of 8.2x our FTM EBITDA estimate," added the analyst.

For an analyst ratings summary and ratings history on KMG Chemicals click here. For more ratings news on KMG Chemicals click here.

Shares of KMG Chemicals closed at $26.44 yesterday.

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