SOA - Solutia Inc.

[racemize]

I just stumbled on this in the recent ValueLine edition (attached the report).  Trading at 6.8 P/E and appears to have a lot of potential growth.  Any one heard of this/have any thoughts?  I'm planning on looking into reports next, but thought I'd post it up while it was fresh.

f98546.pdf

[BargainValueHunter]

I just stumbled on this in the recent ValueLine edition (attached the report).  Trading at 6.8 P/E and appears to have a lot of potential growth.  Any one heard of this/have any thoughts?  I'm planning on looking into reports next, but thought I'd post it up while it was fresh.

 

I've been looking into the warrants for a while.

 

http://www.solutia.com/reorganization/faqs.pdf

 

-and-

 

http://www.bizjournals.com/stlouis/stories/2008/02/25/daily60.html

 

Solutia's emergence from bankruptcy is official as of Thursday, and the company believes it is stronger and more competitive than at any point in its history, Solutia said.

 

During its four-plus years in bankruptcy Solutia diversified its geographic presence leading to an increase in international sales. In 2007, the company's sales from outside the United States were 55 percent of Solutia's total revenue, compared to 39 percent in 2003. The increase has been driven primarily by Solutia's Asian growth strategy, as well as significant growth in Europe.

 

...looks very interesting...

[racemize]

I've been digging into their recent 10-K. 

 

With regard to environmental litigation matters, they say this:

 

"Upon assessment of the terms of the Monsanto Settlement Agreement and other defenses available to us, we believe the probability of an unfavorable outcome to us on the Putnam County, West Virginia; Escambia County, Florida; and St. Clair County, Illinois and related litigation against us is remote and, accordingly, we have not recorded a loss contingency.  Nonetheless, if it were subsequently determined these matters are not within the meaning of Legacy Tort Claims, as defined in the Monsanto Settlement Agreement, or other defenses to us were unsuccessful, it is reasonably possible we would be liable for an amount which cannot be estimated but which could have a material adverse effect on our consolidated financial statements."

 

So perhaps this issue isn't too big of a deal (assuming they are correct); however, I have some concerns regarding their competitive advantage, given that there are several, separate large players competing with their chemical products.  On the other hand, they have patents, which may help offset that concern.  Additionally, the market appears to be growing for them (tires, solar panels, various auto and commercial glass, etc.), so perhaps the competitive squeeze will not happen in the short term. 

 

Still doing research, and am on the fence.  If anyone else is doing any in depth look, I would appreciate the thoughts.

[BargainValueHunter]

Through research note from Q3 2010:

 

http://www.alembicglobal.com/assets/files/company%20reports/080910%20soa.pdf

 

Our analysis suggests that management could spend around USD230m for acquisitions while

remaining within the guided to net debt to EBITDA range. We have carried out an acquisition

versus share buyback analysis that concludes that in order to generate acquisition related 2011

EPS accretion at levels higher than a buyback the price-to-earnings multiple of the acquired

company pre synergies should be 7.8x or less – suggesting to us that share buybacks at current

depressed valuation levels may be a prudent strategy. We rate Solutia Overweight with a sum-ofthe

parts generated target price of USD21.

[mankap]

Thanks for posting about SOA

Looks very interesting .After emerging from bankruptcy the metrics have been improving.Operating margin has been improving and they having been paying down debt.They are the world leader in Speciality chemicals.Cashflow is strong.

I am going to study more .If the valueline's projection of cashflow in 2014 are correct , this is a steal at this price.

Of course the risk is global economy.If it goes into deep recession , then SOA will also take a hit

 

Have they been buying back shares ?

[racemize]

Thanks for posting about SOA

Looks very interesting .After emerging from bankruptcy the metrics have been improving.Operating margin has been improving and they having been paying down debt.They are the world leader in Speciality chemicals.Cashflow is strong.

I am going to study more .If the valueline's projection of cashflow in 2014 are correct , this is a steal at this price.

Of course the risk is global economy.If it goes into deep recession , then SOA will also take a hit

 

Have they been buying back shares ?

 

yes, there's been some buybacks, but I'm not sure about upcoming ones.

[mankap]

SOA initiated qtry dividend today.It amounts to around 1% at current price.

This is the first step in returning capital to shareholder.It shows the confidence of management in cashflow also.

I expect SOA to increase dividend in near future.

[mankap]

Eastman acquiring SOA at 27.65

 

Thanks Race for posting on SOA