Huntsman Corporation (HUN), mcap=$6.3bn, price $32.75 vs $26.60

HUN pitch:
– Global specialty chemicals company with leading positions in three attractive specialty chemicals segments (mainly Polyurethanes) with consolidated industry structure and above-average structural demand growth.
– Trades at just below 5x EBITDA, whereas would be expected to trade at a premium to highly commoditized peers.
– Has sold the more commoditized businesses for close to 8x EBITDA and used the sale proceeds to deleverage the balance sheet and buy back stock.
– Given a dramatic improvement in portfolio composition through a multi-year corporate realignment, an unlevered balance sheet, and the extremely dislocated valuation, there is significant optionality around M&A interest in HUN.

HUN valuation:
– Normalized cash EPS is $4.65 and yields a target price for the stock of ~$56/share on a 12x multiple.
– The historical multiple is closer to 15x, which would give a target of ~$70 per share.

Exp. gain: +100% to $56/share

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