Methanex Coporation Report

Methanex Corporation (USA)
Report Date
2011-09-27
Basics Pages 1 to 3
.Highlights
.StockMarks
.Profile
.Rating determinants
Benchmarks Pages 3 to 5
.Sector
.Competitors
.Peers
.Pairs
Quality Drivers Pages 5 to 7
.Business
.Management
.Price
Valuation Pages 7 to 8
.Attractiveness
.Nominal Rates
.Fair value rates
Market Pages 8 to 9
.Risk
.Sentiment
Summary Due Diligence Report
Conclusions Page 9
Highlights
Methanex Corporation (USA) is an average quality company with a neutral outlook. Methanex Corporation
(USA) has weak business growth and is run by efficient management. The trend in Methanex Corporation (USA)
fair value exchange rate against its closest rated-competitor, OMNOVA Solutions Inc., has been stable over the
past 2 weeks. When compared to its closest peer, Cytec Industries Inc., Methanex Corporation (USA) shows
similar overvaluation and is equally likely to underperform the market.
StockMarks Ratings
Total Quality
Classical
Business
Management
Price
Volability
Outperformance
SMT
SMC
SMB
SMM
SMP
SMV
SMO
Summary StockMarks Ratings for Methanex Corporation (USA) were calculated in relation to the entire
population of 4204 United States-listed companies rated today, using a scale from 0 (worst) to 100 (best).
For an explanation of each rating, see page 10.
1
2009 Marques Mendes & Associados Lda (MM&A). All Rights Reserved. Please read disclaimer in page 10.

Company Profile
Ticker
Company
Sector
Industry
Exchange
MEOH
Methanex
Corporation (USA)
Basic Materials
Chemicals Commodity
NASDAQ
Current Stock Price: 22.000
Market Capitalization (M): 2041.2640
52-Week Range: 20.01 - 34.90
EPS: 1.3960
Methanex Corporation (USA)'s

registered activity is in the
Chemicals - Commodity industry.
The table above gives a profile of
the company.
The chart below shows the

movements of the
Total Quality StockMark (SMT)
Data as of Market
Close:
2011-09-27
and share price expressed as

indexes since we began rating the
company.
What determines Methanex

Corporation (USA)s Quality
StockMarks?
Methanex Corporation (USA)s long
-term investment attractiveness
rating (Total StockMark or SMT),
depicted in the chart below, is
driven by management efficiency.
It is a large-cap stock currently

trading at a multiple of
15.76 times earnings.
While Methanex Corporation
(USA)'s share price has fallen
considerably in the last quarter, the
company's long-term investment
rating (chart above) remained
unchanged over the same period.
2

An important question to ask is

whether Methanex Corporation
(USA)s underlying long-term
fundamentals justify the steep
decline in the company's share
price.
We can examine this issue using
the StockMarks framework.
First, in the chart on the right, we
compare the companys trend for
each rating, followed by a
comparison of the companys
overall long-term investment
attractiveness rating (Total
StockMark or SMT) in relation to its
sector (chart below).
Ratings showing a positive

trend: Total; Management;
Price; Classic;
Ratings showing a negative
trend:
Business; Volatility;
Outperformance;
Recent rating trends:

currently has an overall quality
rating below the average of its
sector.

currently has an overall long-term
investment attractiveness rating
(Total StockMark or SMT) of 44,
placing Methanex Corporation
(USA) below the SMT average of
51.03 for United States-listed
companies.
This rating ranks Methanex
Corporation (USA) sixth when
compared to ten of its closest
peers, selected because of
similarity of business, financial and
market-positioning factors such as
size (see page 5).
How do the Methanex

Corporation (USA)'s ratings
rank among selected
benchmark groups?
StockMarks ratings were
calculated in relation to the total of
4204 United States-listed
companies rated today. Although
the scale from 0 to 100 is in itself
meaningful, for benchmarking
purposes we need to define a few
relevant reference groups, namely
competitors, correlated stocks and
value investing peers.
3

To quickly assess Methanex
Corporation (USA)s relative
position the following tables show
the ratings of similar companies for
these benchmark groups.
Methanex Corporation (USA)s

best rank among competitors
is third for the Price
Attractiveness (SMP) rating.
The closest competitor, OMNOVA
Solutions Inc. has a similarity index
of 75% and a market share of 0.4%
compared to Methanex Corporation
(USA)s market share of 0.8%
(See table on the right).
competitors were selected based on
the registration industry, total
revenue and market capitalization
among rated companies.
These do not include non-listed
companies and foreign competitors,
which may be more
significant.
Similarly, we calculated the industry
market share only in relation to
rated companies. Therefore, a
100% market share does not mean
that the company has no
competitors in the industry.
Georgia Gulf Corporation is the
closest stock for pair trading with a
similarity index of 75%, defined on
the basis of
market correlation, sector and
trading volumes.
To assess the recent
convergence/divergence trend,
readers should use a chart to
compare the prices of the chosen
pair. SADIF subscribers may draw
such chart by choosing option 3 in
the Due Diligence Section.
Benchmark group: Industry Competitors

Ticker
Company
Company Name
Similarity Industry
SMT SMB SMM
%
Share %
MEO Methanex Corporation

H
(USA)
SMP
0.81
44
38
66
34
Competitor 1
OMN OMNOVA Solutions Inc.
75.0
0.39
57
50
74
35
Competitor 2
RPM RPM International Inc.
66.7
1.72
33
29
57
34
Competitor 3
Westlake Chemical
WLK
Corporation
66.7
1.44
50
44
70
34
Competitor 4
CYT Cytec Industries Inc.
66.7
1.59
27
23
57
34
58.3
0.72
26
24
54
33
58.3
0.72
36
35
56
35
Competitor 5
SHLM A. Schulman, Inc.
Competitor 6
ARJ
Arch Chemicals, Inc.
Competitor 7
USU USEC Inc.
58.3
0.92
35
47
45
33
Competitor 8
OLN Olin Corporation
58.3
0.76
49
50
64
34
Competitor 9
NEU NewMarket Corporation
58.3
0.85
66
55
77
36
Competitor 10
PEIX Pacific Ethanol Inc
50.0
0.15
19
29
15
41
The success of pair trading

strategies depends on the
investors ability to forecast the
convergence path.
However, convergence itself may
only happen if the two companies
are not diverging in a fundamental
way. Investors can evaluate this
possibility by comparing the
StockMarks quality ratings shown in
the second table below.
In relation to its highest correlated

stocks (for pair trading) Methanex
Corporation (USA)s best rank is
second for the Management
Efficiency (SMM) rating.
However, to assess pair trading
convergence it is also important to
consider Methanex Corporation
(USA)s worst ranking, which is
seventh for the Business Quality
(SMB) rating.
Benchmark group: Pair Trading

Ticker
Company
Company Name
Similarity
SMT SMB SMM SMP
%
MEOH Methanex Corporation (USA)
44
38
66
34
CYT
Cytec Industries Inc.
83.3
27
23
57
34
Pair 2
GGC
Georgia Gulf Corporation
75.0
26
24
53
34
Pair 3
MBLX Metabolix, Inc.
75.0
17
14
65
Pair 1
Pair 4
Pair 5
Pair 6
NEU
NewMarket Corporation
75.0
66
55
77
36
CLS
Celestica Inc. (USA)
70.8
69
62
55
67
66.7
41
47
52
35
BOOM Dynamic Materials Corporation
Pair 7
MWV
MeadWestvaco Corp.
66.7
28
25
53
34
Pair 8
OMG
OM Group, Inc.
66.7
49
54
59
33
Pair 9
JAG
Jaguar Mining Inc.
66.7
72
81
55
35
Pair 10
TS
Tenaris S.A. (ADR)
66.7
49
49
62
35
In general, pair trading requires

degrees of similarity above 70%.
4

Likewise, we should note the lastmonth price divergence, which was
0.079 in relation to its closest pair.
At this stage, some investors may

find it useful to read the Due
Diligence Reports for these peers
or competitors.
Peer Analysis
How good is the Methanex

Corporation (USA)s
business?
Benchmark group: Investment Peers

Ticker
SMT SMB SMM SMP
Company
MEOH
44
38
66
34
Peer 1
CYT
Cytec Industries Inc.
52.1
27
23
57
34
Peer 2
OMN
OMNOVA Solutions Inc.
50.0
57
50
74
35
Peer 3
OLN
Olin Corporation
44.8
49
50
64
34
Peer 4
NEU
NewMarket Corporation
42.7
66
55
77
36
Peer 5
DSWL
Deswell Industries, Inc.
41.7
22
24
36
33
Peer 6
ALB
Albemarle Corporation
41.7
51
42
71
35
Peer 7
SHLM
A. Schulman, Inc.
38.5
26
24
54
33
Peer 8
WLK
Westlake Chemical Corporation
38.5
50
44
70
34
Peer 9
PENX
Penford Corporation
37.5
23
24
42
33
Peer 10
RPM
RPM International Inc.
37.5
33
29
57
34
The overall conclusion is that

Methanex Corporation (USA) is an
average quality company with a
neutral outlook.
Nevertheless, we need to look
further into its determinants by
examining each quality rating
separately.
We selected also a group of
investment peers in terms of longterm operational and financial
similarities. Because of the
stringency of the criteria used, not
all companies have a degree of
similarity greater than the minimum
of 50% recommended for reliable
benchmarking. Among this group
shown in the table above on the
right, Methanex Corporation (USA)
s best rank is third for the Price
Attractiveness (SMP) rating.
Similarity
%
Company Name

has weak business quality
growth.
currently has a Business
StockMark (SMB) of 38, indicating
that the company's long-term
business growth rates are
significantly below the sector
average of United States-listed
companies.
The radar chart above provides a

synopsis of all of Methanex
Corporation (USA)s ratings in
comparison to its top two peers.
5

This rating places Methanex
Corporation (USA) sixth in terms of
growth in relation to its ten closest
peers.
The previous chart shows the
movements in the SMB and the
ratings of the three indicators used
in the calculation of the business
rating.
Based on its
fundamentals,Methanex
Corporation (USA) has
efficient management
The Management StockMark (SMM)
measures the ability of a company's
management to transform gross
margins into earnings per share.
in place as it takes a few quarters

before its impact is shown in the
company financials.
Also, sometimes a small temporary
decline or rise may not be
attributed to a change in efficiency
but are instead the result of large
shifts in investment/disinvestment.
The SMB's recent staganation was

not primarily due to a growth in the
rating of the company's sales
elasticity.
The sales elasticity indicator
compares the long-term revenue
growth of the company to other
companies in its industry.
The growth in the sales elasticity
pushed this indicator below the
average, suggesting that Methanex
Corporation (USA) is growing at a
faster pace than its industry.
business rating is 0.76 times lower
than that of its closest competitor,
OMNOVA Solutions Inc..
currently has a SMM of 66, the
highest of its quality sub-ratings.
Management Classification Grid
For a descriptive classification of
management efficiency based on
an interval scale, we use the
following five categories:
Category
SMM Rating
First Class
90-100
Efficient
55-89
Average
40-54
Mediocre
20-39
Inefficient
0-19
The chart above shows the

movements of the SMM and the
rating's three determinants.
Comparing the management
efficiency of Methanex Corporation
(USA) with that of its closest
competitor, OMNOVA Solutions
Inc., reveals that Methanex
Corporation (USA)s rating is 0.9
times lower.
The assessment of the management
efficiency trend needs to be qualified
by taking into account how long the
incumbent management has been
Finally, despite the importance of

management efficiency, investors
should not neglect other more
subjective management attributes
such as integrity and business
savvy, which are beyond the scope
of this report.
Is Methanex Corporation
(USA) correctly priced?
With the recent steep decline in
share price, the possibility of the
company's shares being oversold
increases.
We can assess whether the
Methanex Corporation (USA) is in
fact undervalued by looking at the
company's Price Attractiveness
StockMark (SMP).
6

The SMP takes into account both
fundamental and technical indicators
to arrive at a rating of the
attractiveness of a company's stock
to long term investors at its current
price.
currently has a Price StockMark of
34, indicating that the market is
overvaluing Methanex Corporation
(USA)s long-term fundamentals.
On this count, we can observe that

Methanex Corporation (USA) is
already overvalued and still getting
more overvalued.
To see if this situation is unique to
the company, we can check the
exchange rate at which the stock is
trading in relation to its top
competitors and peers.
The fair value exchange rate

of Methanex Corporation
(USA)s stock in relation to its
closest competitor OMNOVA
Solutions Inc. is stable.
The valuation of stock-for-stock
offers in M&A transactions is quite
complex when shareholders of the
acquirer and the target
company hold significantly different
views on the intrinsic value of their
companies.
The nominal stock exchange rate
as given by current market prices
(shown in the chart below) may be
misleading if markets, as they often
do, over-estimate or underestimate
the premium/discount relative to
intrinsic value.
A chart of the SMP and the ratings

of some of the company's key price
valuation multiples is shown above.
Investors need to consider the most
recent absolute value of the SMP
and its determinants together with
the SMP trend.
First, to verify if the stock is caught
at a stationary level, indicating that it
may remain undervalued or
overvalued for long periods.
Second, investors should assess if it
is diverging or converging in relation
to a fair valuation (SMP between 4555).
7

Warren Buffett popularized the idea
that many air-for-assets risky
acquisitions take place during bull
markets because overvalued
acquirers can afford to overpay
because they are in effect using
stock as if it was counterfeit money.
The rates quoted give us the number

of benchmark shares that we could
buy with one share of Methanex
Corporation (USA).
Therefore, an increase (decrease) in
the rate of exchange means that
Methanex Corporation (USA) is
appreciating (depreciating).
The chart on the left shows the

evolution of the fair value
exchange rates for Methanex
Corporation (USA) measured in
index form, in relation to some of
its benchmark stocks.
For instance, we can observe that
in relation to the first competitor
the trend during the last quarter
has been towards appreciation.
The market risk

The analysis of market risk is
done through the Volatility
StockMark (SMV) rating.
This rating combines the previous
year price variance and price level
with longterm market correlation in
a way that we can interpret it in
the usual scale of 0 (worst) to 100
(best).
Unfortunately, the estimation of

intrinsic values is a very challenging
task.
However, we may minimize the
problem and bypass the need to
estimate intrinsic values by adjusting
the nominal stock exchange rates
with our Price Attractiveness
StockMark (SMP), which estimates
the degree of over or undervaluation
at any level of the market premium
or discount.
The trend in the fair value exchange

rates shown above is relevant not
only to adjust valuations but also to
assess the price outlook for
Methanex Corporation (USA).
Comparing the volatility rating of

the Methanex Corporation (USA),
which is currently at 48, with its
closest competitor, OMNOVA
Solutions Inc., we see that it is
0.64 times lower.
By adjusting the nominal rates by

the relative SMPs we obtain the fair
value exchange rate.
Current nominal rates vs. fair value
stock exchange rates are shown in
the previous page:
8

Although relevant in itself, the rating
is more useful when we compare its
evolution to the trend in stock price.
The chart on the previous page
shows both in an index form.
We can observe that Methanex
Corporation (USA)s market risk
outlook is mixed.
It is also important to observe the
trend in the volatility of SMV
because this provides a good
indication about the stickiness of
short term price movements.
The market sentiment in

relation to Methanex
Corporation (USA) is negative
and is deteriorating
For this, we use the

Outperformance StockMark
(SMO), which measures the
likelihood of the company to
outperform the market in the near
term.
No due diligence is complete

without considering the market
sentiment in relation to Methanex
Corporation (USA), because this is
paramount in determining the stock
s performance in the short to
medium-term.
This rating combines the

company's past quarter price
dynamics with its market risk and
total quality, in a scale from 0
(worst) to 100 (best).
SMO is currently at 37.
Looking at its trend in the chart on
the left, we can see that it is
deteriorating.
When compared to its closest
peer, Cytec Industries Inc.,
shows similar overvaluation and is
equally likely to underperform the
market.
While, if compared to its first
competitor, OMNOVA Solutions
Inc., Methanex Corporation (USA)
shows similar overvaluation and is
equally likely to underperform the
market.
Conclusions
The company's share price in the past year has been declining, but we believe that its underlying fundamentals
will determine the stocks long-term performance.
A StockMarks analysis of Methanex Corporation (USA) reveals a company with an average quality and weak
long-term business growth. The likelihood of Methanex Corporation (USA) stock to outperform the market as
measured by the Outperformance StockMark (SMO) is below average with a rating of 37 / 100.
The risk associated with holding the shares as measured by the Volatility StockMark (SMV) is average with
a rating of 48 /100. Overall, we believe Methanex Corporation (USA) to be a below average long-term
investment.
9

The StockMarks Ratings

Classical StockMark (SMC)
Total Quality StockMark (SMT)

The overall long-term investment-attractiveness
of a company based on a combined three
dimensional analysis of three sub-ratings:
Business, Management and Price.
Short-medium term attractiveness rating combining

SMT and SMP.
Business StockMark (SMB)

A company's business quality based on
variables including: operating margin, sales
elasticity and sales growth rate.
Price StockMark (SMP)

A company's price quality rating in terms of
undervaluation reflected by valuation
measures such as price to book, price to
sales per share and price to earnings per
share.
Management StockMark (SMM)

A company's management quality based on
the following key indicators: return on
assets, earnings per employee and the
earnings growth rate.
Outperformance StockMark (SMO)
Volatility StockMark (SMV)
The likelihood of a stock to outperform the market based

on the valuation of the company, the SMV and the SMT.
Risk of the stock based on numerous historical analyses of

stock price and market correlation.
2009 Marques Mendes & Associados Lda (MM&A). All Rights Reserved. This report is for information purposes only and is not a solicitation or advice to buy or
sell any security. The data contained within this report is not warranted to be accurate or complete. This report is only intended as a summary of SADIF's stock
ratings and not a recommendation for stock purchase or sale. Redistribution of this report without explicit permission is strictly prohibited. All logos are the
copyright property of their respective companies and are used here only to aid the reader in identification of the subject of the article. The author of this article
does not hold a position in any of the companies featured within this report.
Marques Mendes & Associados Lda. Rua Domingos F. Pinto Basto, 17 3830-176 Ilhavo, Portugal,
Ph: (+ 351)234 322 037 Email: research@sadifanalytics.com
10

Methanex Coporation Report

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Methanex Coporation Report

Uploaded by

Copyright:

Available Formats

Methanex Corporation (USA)

Summary Due Diligence Report

Methanex Corporation (USA)

Current Stock Price: 22.000

Market Capitalization (M): 2041.2640

52-Week Range: 20.01 - 34.90

Methanex Corporation (USA)'s

The chart below shows the

and share price expressed as

What determines Methanex

It is a large-cap stock currently

Methanex Corporation (USA)

An important question to ask is

Ratings showing a positive

Methanex Corporation (USA)

Methanex Corporation (USA)

How do the Methanex

Methanex Corporation (USA)

Methanex Corporation (USA)s

Benchmark group: Industry Competitors

MEO Methanex Corporation

OMN OMNOVA Solutions Inc.

RPM RPM International Inc.

CYT Cytec Industries Inc.

SHLM A. Schulman, Inc.

Arch Chemicals, Inc.

USU USEC Inc.

OLN Olin Corporation

NEU NewMarket Corporation

PEIX Pacific Ethanol Inc

The success of pair trading

In relation to its highest correlated

Benchmark group: Pair Trading

MEOH Methanex Corporation (USA)

Cytec Industries Inc.

Georgia Gulf Corporation

MBLX Metabolix, Inc.

Celestica Inc. (USA)

BOOM Dynamic Materials Corporation

Jaguar Mining Inc.

Tenaris S.A. (ADR)

In general, pair trading requires

Methanex Corporation (USA)

At this stage, some investors may

How good is the Methanex

Benchmark group: Investment Peers

Methanex Corporation (USA)

SMT SMB SMM SMP

Cytec Industries Inc.

OMNOVA Solutions Inc.

Deswell Industries, Inc.

Westlake Chemical Corporation

RPM International Inc.

The overall conclusion is that

Methanex Corporation (USA)

The radar chart above provides a

Methanex Corporation (USA)

in place as it takes a few quarters

The SMB's recent staganation was

The chart above shows the

Finally, despite the importance of

Methanex Corporation (USA)

On this count, we can observe that

The fair value exchange rate