European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<a href="https://www.smartkarma.com/entities/elementis-plc" target="_blank" data-smartkarma-citation="entities:21916:1" rel="noopener">Elementis PLC (ELM LN)</a> has rejected three approaches from <a href="https://www.smartkarma.com/entities/minerals-technologies-inc" target="_blank" data-smartkarma-citation="entities:6088:1" rel="noopener">Minerals Technologies (MTX US)</a>, at 107p, 117p and 130p (10.3x EV/Fwd EBITDA and 20.3x P/Fwd EPS, Capital IQ consensus).
<ul>
<li>All were unanimously <a href="https://www.elementis.com/sites/default/files/2020-12/201206%20Rejection%20of%20Minerals%20Technologies%27%20proposal.pdf" target="_blank" rel="noopener">rejected by the Board of Elementis</a>, which said that even the last proposal was highly opportunistic, coming at a low point of earnings and value, and significantly undervalues Elementis and its future prospects (it has a point). It is signaling that a bid could be considered at c. 200p.</li>
<li>On 6 December, Minerals Technologies cancelled the acquisition of Elementis.</li>
<li>On 8 December, shareholder J.O. Hambro (4.25% stake) told Elementis to engage with Minerals Technologies to seek an improved bid.</li>
</ul>
Elementis trades at a 20% discount to Diversifieds' peers. Coronavirus pandemic second wave restrictions cloud the outlook, as the Board says, especially for Personal Care and Talc. Nevertheless Elementis is on only a recovered NTM PE of 20.3x for 2021e and trading below Diversifieds' median PE of 25x. This appears low, in spite of higher financial leverage (7.9x total debt/EBITDA which results in a 5-year beta of 2.28 vs. 0.96 median of peers), given lower price cyclicality.
<div>
Valuation is 169p per share (average of NTM EBITDA median implied equity value and NTM P/E), a 30% upside to Minerals Technologies last offer.
<ul>
<li>The last approach by Minerals Technologies (130p) should act as support for the share price of Elementis in the short term.</li>
<li>
Capital IQ complied consensus has a median target price of 142p, also above Minerals Technologies offer.</li>
</ul>
</div>
Recommendation is LONG Elementis, TP 169p.

Elementis PLC (ELM LN) has rejected three approaches from Minerals Technologies (MTX US), at 107p, 117p and 130p (10.3x EV/Fwd EBITDA and 20.3x P/Fwd EPS, Capital IQ consensus).

All were unanimously rejected by the Board of Elementis, which said that even the last proposal was highly opportunistic, coming at a low point of earnings and value, and significantly undervalues Elementis and its future prospects (it has a point). It is signaling that a bid could be considered at c. 200p.
On 6 December, Minerals Technologies cancelled the acquisition of Elementis.
On 8 December, shareholder J.O. Hambro (4.25% stake) told Elementis to engage with Minerals Technologies to seek an improved bid.

Elementis trades at a 20% discount to Diversifieds' peers. Coronavirus pandemic second wave restrictions cloud the outlook, as the Board says, especially for Personal Care and Talc. Nevertheless Elementis is on only a recovered NTM PE of 20.3x for 2021e and trading below Diversifieds' median PE of 25x. This appears low, in spite of higher financial leverage (7.9x total debt/EBITDA which results in a 5-year beta of 2.28 vs. 0.96 median of peers), given lower price cyclicality.

Valuation is 169p per share (average of NTM EBITDA median implied equity value and NTM P/E), a 30% upside to Minerals Technologies last offer.

The last approach by Minerals Technologies (130p) should act as support for the share price of Elementis in the short term.

Capital IQ complied consensus has a median target price of 142p, also above Minerals Technologies offer.


Recommendation is LONG Elementis, TP 169p.

Macro Strategist, Saxo Capital Markets

Kay Van-Petersen

Macro Strategist

Saxo Capital Markets

Thematic (Sector/Industry)

<ul><li>It's time to break out the analysis on gold and silver miners</li><li>Some goldminers are trading well below P/B, with potential price moves of +4x just to get back to median P/B levels</li><li>Fed week: watch for dovishness; US GDP watch for a miss. Both of these plus coming up to month end could add to near-term equity bullish sentiment</li><li>Central bank meetings include Japan, New Zealand, South Africa, Russia and Nigeria</li></ul>

It's time to break out the analysis on gold and silver minersSome goldminers are trading well below P/B, with potential price moves of +4x just to get back to median P/B levelsFed week: watch for dovishness; US GDP watch for a miss. Both of these plus coming up to month end could add to near-term equity bullish sentimentCentral bank meetings include Japan, New Zealand, South Africa, Russia and Nigeria

The Macro Take: Get the Picks Out for Gold and Silver Miners

United States

Minerals Technologies Inc. is a resource- and technology-based organization that develops and produces performance-enhancing minerals, mineral-based, and synthetic mineral products.  The Company offers its products to the paper, steel, polymer, and other manufacturing industries on a worldwide basis.

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Minerals Technologies (MTX US)

Lowball Offers by Minerals Technologies

Elementis trades at a 20% discount to Diversifieds' peers. Recommendation is LONG TP 169p (average of NTM EBITDA median implied equity value and...

Jesus Rodriguez Aguilar

The Macro Take: Get the Picks Out for Gold and Silver Miners

It's time to break out the analysis on gold and silver miners Some goldminers are trading well below P/B, with potential price moves of +4x just...

Kay Van-Petersen

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