(By Balaseshan) CIBC World Markets Inc. analyst Jacob Bout upgraded his rating on shares of Methanex Corp. (NASDAQ:MEOH) to "Sector Performer" from "Sector Underperformer" due to valuation. The brokerage lowered price target on the methanol supplier to $31 from $32.
In general, Bout believes there is still a short-term risk that methanol prices will move lower given weak global methanol demand and declining oil prices (and pressure on Methanex share price in the short term).
The analyst's net asset value (NAV)-based price target (i.e. 1X NAV) has declined from $32 to $31 to reflect a slight change in production growth, but he maintained his long-term non-discounted methanol price of $400/mt (assuming $100/bbl oil and crack spread of $9.25).
Bout said Methanex's primary focus remains fast-tracking the relocation of a Chilean plant (1Mt) to Geismar for start-up in Q4-2014. The recent announcement by Celanese Corp. (NYSE:CE) to construct a 1.3Mt plant in Texas confirmed the resurgence of U.S. methanol supply with the advent of cheap natural gas (4.8Mt by 2015).
The brokerage lowered its 2012 EPS estimate for Methanex to $2.66 from $2.70, while maintaining its 2013 estimate of $3.01.
With the slide in methanol spot prices (down 10% or $40/t in the last six weeks), Bout has lowered his 2012 EPS estimates. He expects methanol prices to decline about $10/t in the next few months but low Chinese coastal inventories should limit further declines.
MEOH is trading up 4.92% at $27.32 on Wednesday.