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Strategies & Market Trends : Dividend investing for retirement
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To: Elroy who wrote (31759)7/26/2019 8:56:28 AM
From: E_K_S  Read Replies (2) of 34328
 
One main reason I started a position in UAN was Carl Ichan's investment. He owns a large stake in CVRR. He can dictate important/large investments, company strategy etc. He looks at efficiencies, scale, and is a good capital allocator. I bank on his oversight for guiding the Board. So far has helped lead the company into the last acquisition, scale the company to become more efficient, utilize two different inputs to their manufacturing process (coke a by product from CVRR and NG).

These annual capital costs (ie Capx) are somewhat fixed but when fertilizer prices fall so much (like last several quarters), the company books a loss.

My bet is long term end unit price for fertilizer s/d increase (reversion to the mean), and revenues will increase resulting in positive EPS and higher distributions.

As you pointed out, they need to recapitalize their current debt/bond as their current rate (due in 2023) is quite high. This 9% + rate s/d come down to 5% (so almost half of what they pay now). If the market lets them price at such a rate, that would lock in lower Capx interest costs.

I still think downside risk low and distributions yield high relative to current 10yr Treasury rates. I suspect market will price UAN at a 10% yield which implies stock price s/d eventually sell North of $6.50/share.

Therefore, largest key event is their bond refinance. Buying their new baby bonds if 5 years or less may be something to look at if you can get a 6% yield.

Continue to hold UAN, may take some of the equity I have in UAN and move into their baby bonds when issued.

EKS
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