Methanex Corp. was upgraded to outperform from market perform at Raymond James on Wednesday awaiting price dislocations within the United states methanol market fading.
Analyst Steve Hansen also raised his price target on the stock to US$40 from US$32 round the expectation the broader methanol market will improve inside the partner of 2016, along with both oil along with other energy products.
“While North America is consistently exchange a high (atypical) discount to China, most industry stakeholders believe this may prove an extremely short-term (2 to 4-month) phenomenon,” Hansen said inside a research note.
Industry stakeholders at Raymond James’ recent Methanol Forum also suggested demand will stay healthy, surprise to a lot of investors given ongoing woes within the oil patch.
For example, Argue anticipates the roughly six percent compound annual rate of growth for global methanol demand continues for the next Five years. It also sees just one new greenfield project reaching the start-up phase prior to the end in the decade.
“One of the most striking takeaways by using this year’s forum was hearing exactly how quickly C and dramatically C that new supply prospects are fading,” Hansen said.
With Methanex poised to take benefit of the pricing recovery, the analyst sees potential upside to both its earnings and free income as oil prices recover.
Acknowleging the stock doesn’t look excessively cheap, he added when oil prices remain lower-for-longer, Methanex’s health free income ought to provide support for the stock, and its history of share buybacks and dividend increases.
