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Methanex (MEOH) Downgraded To 'Sector Underperformer' By CIBC, PT Raised

 January 14, 2013 02:29 PM
 


(By Balachander) Methanex Corp.  (NASDAQ: MEOH) shares were downgraded to "Sector Underperformer" from "Sector Performer" by CIBC World Markets Inc.

The brokerage raised price target on the stock to US$31.00 from US$30.00.

CIBC said its $31 NAV assumes a methanol price of $450 in 2013, $425 in 2014 and $400 Long-term. In addition, the brokerage has assumed the ramp up of capacity from 4.7Mt in 2013 to 9.0Mt in 2017.

"A $400/t Methanol price maybe too optimistic long-term. Historically, methanol prices have tracked oil prices (reflecting trend of direct blend of methanol into gasoline). Our in-house WTI forecast is $85/bbl and Brent is $95/bbl, which implies an energy-equivalent methanol price of $371/t," CIBC said.

[Related -Methanex Corporation (MEOH): Waiting For Further Pullback]

The brokerage said Trinidad gas supply issues that tightened methanol market in 2012 should ease in 2013. Maintenance work by the country's biggest gas producer, BP (BP-NYSE) subsidiary BPTT, which caused the shortage, is now complete.

CIBC wrote it expects Chinese methanol capacity operating above 50 percent in 2013. The brokerage also expect $10-$15/t increase in Chinese coal prices (implying Chinese marginal cost of <$300/t to the coast).

Shares of the Canada-based company shed 2.86 percent to trade at $31.93 on Monday on the NASDAQ. Over the past year, the stock has been trading between $25.12 and $35.52.

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