BoA ups Celanese targets on strong acetyls

12 December 2007 07:52  [Source: ICIS news]

MUMBAI (ICIS news)--Bank of America (BoA) raised Celanese Corp’s 2007 and 2008 earnings per share (EPS) estimates and stock price target on Wednesday due to strength in acetyls, especially in Asia and Europe, a lower sustainable tax rate in Germany and an ongoing mix shift to China.

The bank raised Celanese’s estimated EPS for 2007 to $3.30 (€2.24) from $3.20, and to $3.65 from $3.60 for 2008, which is at the high end of the management’s new range of $3.35-$3.65, it said.

BoA raised the value-added industrial chemicals producer’s price target to $49/share from $48/share earlier, while maintaining its ‘buy’ rating on the firm.

Going forward, BoA is bullish on the company on the back of an expected healthy acetyls cycle through 2009, diminished cyclicality of its portfolio, sustainability of growth drivers in advanced engineered materials and the firm’s high exposure to Asia.

"Celanese’s updated supply-demand analysis suggests a global operating rate of 93% in 2008 followed by a still healthy 91% in 2009 and 2010," BoA said.

"Importantly, no new capacity is expected over the next 15 months," it added.

BoA also saw Celanese’s new compounding capacity in advanced engineered materials (which account for 16% of its sales), which continues to grow at 2-3 times GDP, as a positive for the firm.

Substantial value in unconsolidated joint ventures, a low-cost position with proprietary technology and the company’s geographic mix, which is the best in the sector are other positive factors for Celanese, BoA said.

"Also, we continue to monitor the global supply-demand balance for acetic acid and VAM [vinyl acetate monomer], and consequent effects on prices and margins," it added.

Aside from macroeconomic concerns which could pose a risk to Celanese, company-specific risks include elevated leverage versus peers, BoA said.

The company's shares last closed up just over 4% at $41.03 on the New York Stock Exchange.

($1 = €0.68)

By: Divya Chowdhury
+65 6780 4359

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