Author Topic: DWDP - Dow DuPont  (Read 4691 times)

globalfinancepartners

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Re: DWDP - Dow DuPont
« Reply #10 on: July 27, 2018, 09:22:19 AM »
Did the stock trade in the high 50's?

Starting to move up. I had started accumulating in high $50s and stopped around $65. Got nice-sized position, but wanted more.

Catalysts and positive news flow should be coming, but can’t make myself pay up.


ugadawg_98

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Re: DWDP - Dow DuPont
« Reply #11 on: July 28, 2018, 09:42:25 AM »
When I started buying the old DD shares in 2017, I was getting an effective cost in the new shares in the $50s (DD converted to DWDP at a 1.28 ratio, if I recall). Subsequent purchases were more expensive.

I think it’s still very cheap, I just have a mental block about paying successively higher prices. On a break to low 60s, I’d add more, but absent some market turmoil, I’m not sure we’ll get there. Positive catalysts getting closer.

Spekulatius

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Re: DWDP - Dow DuPont
« Reply #12 on: July 29, 2018, 05:32:50 AM »
Sent chemicals and early cycle business? I rarely have seen large gains with chemicals late in the cycle. I have a soft spot for BASF (BAS.DE). The first stock I ever “owned” via long term rights (Optionsscheine).
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peterHK

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Re: DWDP - Dow DuPont
« Reply #13 on: October 10, 2018, 06:34:15 PM »
Anybody else think this is cheap here?

Spekulatius

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Re: DWDP - Dow DuPontik
« Reply #14 on: October 11, 2018, 03:57:22 AM »
Anybody else think this is cheap here?

10.5x EBITDA for a chemical business seems high. Even businessmen in protected niches like paint, trade at 11x and DWDP has a lotmof cyclical components. Peer EMN trades at 8.3x EBITDA and peer BASF at ~7x (—probably a bit high ex their E&P and refinery business). The only business line within DWDP that deserves a higher multiple is Agro, but it seems to be a small part of the overall company.
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Liberty

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Re: DWDP - Dow DuPontik
« Reply #15 on: October 11, 2018, 06:09:54 AM »
Anybody else think this is cheap here?

10.5x EBITDA for a chemical business seems high. Even businessmen in protected niches like paint, trade at 11x and DWDP has a lotmof cyclical components. Peer EMN trades at 8.3x EBITDA and peer BASF at ~7x (—probably a bit high ex their E&P and refinery business). The only business line within DWDP that deserves a higher multiple is Agro, but it seems to be a small part of the overall company.

I think you're overlooking the specialty businesses, which will be what remain after they spin off the two other divisions.
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peterHK

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Re: DWDP - Dow DuPontik
« Reply #16 on: October 11, 2018, 06:43:17 AM »
Anybody else think this is cheap here?

10.5x EBITDA for a chemical business seems high. Even businessmen in protected niches like paint, trade at 11x and DWDP has a lotmof cyclical components. Peer EMN trades at 8.3x EBITDA and peer BASF at ~7x (—probably a bit high ex their E&P and refinery business). The only business line within DWDP that deserves a higher multiple is Agro, but it seems to be a small part of the overall company.

You're also forgetting that EBITDA is low because Dow in particular was poorly run. Almost every spin out from Dow goes on to massively improve margins , and Ed Breen has thus far been very good at delivering promised synergies pre-spin.

The other thing to remember is that capital intensity is going down because they're focusing more on brownfield projects, debottlenecking etc. rather than major capex, and that should translate into a higher justified EV/EBITDA multiple. I think combined DWDP can do ~52% FCF conversion from EBITDA whereas BASF is closer to 40% for instance.

The final thing you're forgetting is they have significant below the line earnings from affiliates that don't show in EBITDA, so you actually can't use EBITDA unless you're doing SOTP and then adding those affiliate earnings in. LTM that number was $1bn, so at say 8x earnings because they're commodity related, that's $8bn of value (or a little less than $4/share) that doesn't accrue to an EV/EBITDA valuation.

Spekulatius

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Re: DWDP - Dow DuPont
« Reply #17 on: October 11, 2018, 10:00:25 AM »
Thanks for above input, this is highly appreciated. I bought some BASFY today since I know this company well.
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Liberty

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Re: DWDP - Dow DuPont
« Reply #18 on: October 11, 2018, 10:31:34 AM »
Breen has shown with Tyco that he knows how to clean up badly management companies and get the value out (divestitures, spin offs, refocusing R&D and capex, etc). It'll be interesting to see what he can do with these assets. The synergies so far are already pretty impressive.
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