Nalco Holdings (NLC) Poised to Flood Investors with Returns as BRICs Continue Expansion - Barron's (PX, ECL)
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Water is essential for human survival. You can go for weeks without food, but only a few days without water. According to the waterencyclopedia.com, the average human, for drinking, sanitation, and hygiene, needs about 13.2 gallons of water per day. However, clean drinking water is becoming a hot commodity, particularly in exploding economies such as China.
One company poised to benefit as water processing becomes vitally important? Nalco Holdings (NYSE: NLC).
According to Barron's, Nalco controls about 17% of the $20 billion global water-treatment and process-improvement chemical market. Countries like China are becoming an increasingly lucrative area for the company, as the nation struggles to keep fresh water pumping to its people. China accounted for 3.5% of the company's revs last year, though some peg revs from China will increase over 30% this year, with a target of $500 million in annual revs from the country by 2015.
Nalco's stock has blown up over 44% since September 2009, and many analysts see the potential for an additional 50% upside.
Barron's notes that networking is key in China, and Nalco has already responded when they picked up Ying Yeh, formerly head of Eastman Kodak (NYSE: EK) Asian operations, earlier in the year. Yeh is a Beijmg native, naturalized U.S. citizen and one-time head of the U.S. embassy's commercial-affairs department in Beijing.
The company is also seeing some nice growth elsewhere, so much so that earnings are expected to be $1.50 per share for FY10 and $1.75 in FY11, compared to $0.92 in FY09. Revs should grow 8% to $4 billion this year, and 5% to $4.2 billion in FY11. The company pays out a $0.035 quarterly dividend with an annual yield of 0.5%.
NLC runs on operating margins of about 17.6% and currently has free cash flow of $150 million per year.
An analyst at William Blair, using a 9x multiple comparable to peers Praxair (NYSE: PX) and Ecolab (NYSE: ECL) sees the shares trading for $39 when estimating sales of $4.6 billion and EBITDA of $897 million in FY12 The price target is a 41% premium to today's trading range of $26 - $27 per share.
Nalco does carry about $3 billion in long-term debt following a highly-leverage buyout by Blackstone Group (NYSE: BX).
With demand increasing globally, Nalco should be able to flood investors with lots of liquid returns.
One company poised to benefit as water processing becomes vitally important? Nalco Holdings (NYSE: NLC).
According to Barron's, Nalco controls about 17% of the $20 billion global water-treatment and process-improvement chemical market. Countries like China are becoming an increasingly lucrative area for the company, as the nation struggles to keep fresh water pumping to its people. China accounted for 3.5% of the company's revs last year, though some peg revs from China will increase over 30% this year, with a target of $500 million in annual revs from the country by 2015.
Nalco's stock has blown up over 44% since September 2009, and many analysts see the potential for an additional 50% upside.
Barron's notes that networking is key in China, and Nalco has already responded when they picked up Ying Yeh, formerly head of Eastman Kodak (NYSE: EK) Asian operations, earlier in the year. Yeh is a Beijmg native, naturalized U.S. citizen and one-time head of the U.S. embassy's commercial-affairs department in Beijing.
The company is also seeing some nice growth elsewhere, so much so that earnings are expected to be $1.50 per share for FY10 and $1.75 in FY11, compared to $0.92 in FY09. Revs should grow 8% to $4 billion this year, and 5% to $4.2 billion in FY11. The company pays out a $0.035 quarterly dividend with an annual yield of 0.5%.
NLC runs on operating margins of about 17.6% and currently has free cash flow of $150 million per year.
An analyst at William Blair, using a 9x multiple comparable to peers Praxair (NYSE: PX) and Ecolab (NYSE: ECL) sees the shares trading for $39 when estimating sales of $4.6 billion and EBITDA of $897 million in FY12 The price target is a 41% premium to today's trading range of $26 - $27 per share.
Nalco does carry about $3 billion in long-term debt following a highly-leverage buyout by Blackstone Group (NYSE: BX).
With demand increasing globally, Nalco should be able to flood investors with lots of liquid returns.
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