Credit Suisse Reinstates Coverage ON Platform Specialty Products

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  • Platform Specialty Products Corp PAH shares have lost 29 percent in the last three months, down sharply after trading above $18 in early September.
  • Credit Suisse’s John P. McNulty reinstated coverage of the company with a Neutral rating and a price target of $14.
  • McNulty believes that near-term risks overshadow the long-term potential for the company.

The price target implies about 7 percent upside potential. From 2015 through 2017, the earnings accretion from the closing of the Alent and OMG acquisitions could be offset by continued demand weakness from the Ag market as well as currency headwinds, analyst John McNulty said.

McNulty expects Platform Specialty Products to achieve EPS growth from $0.69 in 2015 to $0.88 in 2016 and to $1.13 in 2017. The company’s free cash could surge to $222mm in 2016 and to $255mm in 2017.

The stock has significant upside potential over the next few years, which is good for investors with longer-term horizons, McNulty commented. Benefits would accrue as Platform Specialty Products continues its strategy of building a world-class specialty chemical company “using significant leverage to buy high-quality, high-touch/asset-light businesses that generate robust cash flow.”

He added, however, that there were a number of near-term risks, including gaps in the management team, significant leverage, challenging end markets, and integration risk on account of the several acquisitions made by the company PAH over the past 18 months. The integration risk is compounded by the management issue.

“As such, we believe the risk/reward profile for investors with a 12-month time horizon appears neutral,” the Credit Suisse report stated.

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Posted In: Analyst ColorInitiationAnalyst RatingsCredit SuisseJohn P. McNulty
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