Celanese Expands into Asia

Celanese Corp. (CE - Analyst Report) is in the midst of a major profit improvement program. It has a strong growth strategy with development in Asia as a key factor and there is $400 million of free cash flow per year, primarily focused on share repurchase.

Higher pricing on continued strong global demand for Acetyl Intermediates products, positive currency impacts, growth in Asia supported by the company’s new acetic acid unit in Nanjing, China, as well as sales of Industrial Specialties from the acquired Acetate Products Limited are driving the company’s sales. In addition, the company has leadership positions in oligopolistic markets that have solid fundamentals.

The company raised its EBITDA profit improvement by 2010 to $350-$400 million. About $100-$150 million of this improvement will be from low-cost Asian expansions. Total revenues in 2010 are expected to be $600-$800 million. As part of the share buyback program, the company has already repurchased $60 million of its outstanding common shares.

Currently, Celanese is valued at 12.7x our 2008 estimate of $3.94. We rate the shares a Buy with a target of $56.00. This is 14.2x our 2008 estimate.

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