Hassan Ahmed, Founder and Head of Research of Alembic Global Advisors, says he believes Methanex Corporation (MEOH) is currently undervalued. He says the stock is trading at about half of its replacement value, by which he means 50% of the value of its assets.
“I do consider it extremely attractively valued at the current valuation level,” Ahmed says.
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Because one of the main raw materials for producing methanol is natural gas, Ahmed says Methanex has set up facilities in places where they can go on long-term cheap natural gas contracts. They currently operate in the U.S., Canada, Trinidad, Egypt, Chile and New Zealand, Ahmed says.
“For methanol, like I said, the main growth market tends to be as a fuel additive,” he says. “So obviously demand for methanol has been very robust even in a $60-a-barrel crude oil price environment. I expect that to continue.”
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