Goldman Sachs Upgrades Domtar (UFS) to Buy on Improved UCFS Pricing Outlook
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Price: $55.49 --0%
Rating Summary:
8 Buy, 12 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 4 | Down: 14 | New: 22
Rating Summary:
8 Buy, 12 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 4 | Down: 14 | New: 22
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Goldman Sachs upgraded Domtar (NYSE: UFS) from Neutral to Buy with a price target of $138.00 (from $100.00). Analyst Alex Ovshey is more positive on UCFS pricing.
"Post a deep dive on global UCFS supply/demand fundamentals, we expect US uncoated freesheet (UCFS) producers to successfully realize $80-$100 of the $110-$130/ton price hikes announced in October 2013 and March 2014, respectively, by mid-2014," said Ovshey.
"We upgrade Domtar to Buy from Neutral given its significant leverage to rising UCFS prices, the meaningful step up in EBITDA from the secularly growing Personal Care business, and our expectation for an attractive free cash flow (FCF) yield and favorable capital allocation potential. We raise our 12-month price target to $138 (from $100), implying 31% upside, as we shift to a SOTP methodology, based on our 2015 estimates (we previously used Domtar’s 10-year average forward EV/EBITDA multiple and our 2014 EBITDA estimate) to reflect our confidence in a significant step-up in legacy Domtar earnings by 2015 (from higher UCFS prices) and the sharp increase in Personal Care earnings from closed acquisitions and organic growth. In 2014/15, we expect the Personal Care segment to account for 18% of Domtar's total EBITDA vs. 1%/8%/13% from 2011-2013, respectively," added the analyst.
For an analyst ratings summary and ratings history on Domtar click here. For more ratings news on Domtar click here.
Shares of Domtar closed at $106.25 yesterday.
"Post a deep dive on global UCFS supply/demand fundamentals, we expect US uncoated freesheet (UCFS) producers to successfully realize $80-$100 of the $110-$130/ton price hikes announced in October 2013 and March 2014, respectively, by mid-2014," said Ovshey.
"We upgrade Domtar to Buy from Neutral given its significant leverage to rising UCFS prices, the meaningful step up in EBITDA from the secularly growing Personal Care business, and our expectation for an attractive free cash flow (FCF) yield and favorable capital allocation potential. We raise our 12-month price target to $138 (from $100), implying 31% upside, as we shift to a SOTP methodology, based on our 2015 estimates (we previously used Domtar’s 10-year average forward EV/EBITDA multiple and our 2014 EBITDA estimate) to reflect our confidence in a significant step-up in legacy Domtar earnings by 2015 (from higher UCFS prices) and the sharp increase in Personal Care earnings from closed acquisitions and organic growth. In 2014/15, we expect the Personal Care segment to account for 18% of Domtar's total EBITDA vs. 1%/8%/13% from 2011-2013, respectively," added the analyst.
For an analyst ratings summary and ratings history on Domtar click here. For more ratings news on Domtar click here.
Shares of Domtar closed at $106.25 yesterday.
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