POT: Potash Corp./Saskatchewan Message Board

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Non-Tech : POT: Potash Corp./Saskatchewan

POT 20.65

0.0%

Jan 2 3:00 PM EDT

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From: Dennis Roth	1/25/2008 6:13:20 AM
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Potash Corp. (POT): Growing food is not a luxury - fertilizer fundamentals to stay strong - Goldman Sachs - 01/24/08 What's changed POT reported underlying 4Q07 EPS of $1.11 (GAAP EPS of $1.16 included an $0.11 benefit in future income tax liability partially offset by a $0.06 impaired investments charge), well above consensus of $0.98. POT made a strong case highlighting robust strong global ag conditions that have resulted in higher prices and demand for fertilizers. Recent stock market action over the past 2 weeks seem to imply (wrongly in our view) the current strong market conditions are unsustainable and the convergence of a number of unrelated and minor developments created the perfect storm for profit taking. We still believe the major disconnect between industry fundamentals and recent stock market reaction created a great buying opportunity in Potash. We see POTs share repo announcement (5% of common stock) as more evidence that POT offers long-term opportunity at these levels. Initial 2008 guidance of $6.25-$7.25 (not including any share buyback impact) is well above consensus of $5.87, which has yet to fully reflect the numerous potash price increases. As a result we raise 2008E EPS to $7.35 from $6.60 and 2010E to $9.65 from $9.45. Implications The ag/fertilizer sector offers some of the best fundamentals in a challenging and eroding global macroeconomic environment. Market conditions are very strong and, in our view, POT is in the best position to benefit from improving demand and rising prices as its greatest long-term opportunity lies in its growing potash capacity. With most global producers at full capacity and with limited opportunity for expansion, POT is gradually expanding capacity to meet growing potash demand. Valuation POT trades at 11.4X our 2008 and 10.0X our 2009 EV/EBITDA estimates. We reiterate our $180 12-month PT based on 14X our 2009E EV/EBITDA. Key risks Risks include weather and a severe decline in commodity prices.

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