CABB - model update and comments on Q2 20 results

All,

Please find our updated model here.

CABB’s Q2 20 results last week supports our view on the resilience of the underlying AgChem footprint. The new AgChem contract will lead to a meaningful increase in capex in 2021 and 2022, offset by a pickup in EBITDA from 2023. With CABB, it is always important to monitor how much of these additional contracts generate net new EBITDA as opposed to just replacing EBITDA lost from the ageing of past contracts, reformulations, etc – the dynamic we observed before 2018. In the current strong market, the trust in management’s glass half full view is implied by the CABB bond’s price levels. We still believe there will be better opportunities in the future to set a long position in either the Secured or the Unsecured bonds. The business has traditionally seen episodes of significant short-term volatility, either as a result of business interruptions, supply chain issues, or a deterioration in the AgChem market.

Please find our updated model here.

Feel free to reach out if you would like to exchange ideas on the name.

Juliano