ASH: Valvoline Likely To Be Retained

Analysts at Deutsche Bank reiterate their "hold" rating on Ashland ASH. The target price for ASH has been reduced from $65 to $58. According to Deutsche Bank, the key highlight of the meeting was “CEO's assertion that Valvoline would be retained given its predictability and growth.” The analysts say, “Ashland expects mid-cycle (‘12-14) to mirror ‘04-05 in terms of car/house builds. We estimate $1.3B of EBITDA would result in EPS of $7.35.” According to Deutsche Bank, key takeaways were, “1) Mid-cycle EBITDA target of $1.3B assumes organic growth only, the retention of 2/3 of the $400MM in cost savings/acq. synergies and incremental EBITDA margins of 16-18%. 2) Valvoline will likely be retained if it can sustain EBITDA margins in the high teens. 3) Distribution could also be retained it were to achieve its midcycle EBITDA target as its low capital intensity results in high returns on capital despite low EBITDA margins. 4) Aqualon’s mid-cycle EBITDA target to be driven by emerging markets, new products and end-market volume growth of 5-8%.. 5) Water Technologies mid-cycle EBITDA target to be driven by operating leverage from substantial cost actions and emerging markets (China, Brazil). 6) Performance Materials mid-cycle EBITDA target to be driven by operating leverage, economic recovery, geographic expansion and new products. 50-55% of Performance Materials is specialty with EBITDA margins of 15-20%.” More Analyst Ratings here