The 25 day post-IPO quiet period on OCI Resources, LP (OCIR) comes to an end on October 8, which will likely lead to at least a brief rise in the stock's price as the underwriters release positive research reports. OCIR's strong underwriters, including Goldman Sachs (GS), Citigroup (C), Credit Suisse , and Barclays (BCS), will release positive information into the market beginning on the eighth.
Our work over the past two years and academic studies have empirically revealed a meaningful correlation between the number and visibility of underwriters and the size of the increase in stock price caused by the ending of the quiet period. The increase in price will likely begin in the week running up to the end of the quiet period as investors buy in advance of the release of research, which they know will be typically positive (an underwriter would rarely release a negative research report on a company that it just underwrote).
The company also has projected to offer a 50 cents per share distribution each quarter which calculates to an over 11% plus yield based on today's current price of $18.10. See our recent SeekingAlpha IPO report for OCIR.
OCIR may be an attractive buy over the next few weeks as investors anticipate the research reports that will be released by the underwriters and other firms at the end of the quiet period. We also anticipate that the high yield will also become better well known from the publicity surrounding the reports. This phenomenon occurred recently with another commodity based IPO, Phillips 66 Partners Limited Partnership (PSXP).
OCI Resources produces both soda ash and trona ore through its long-standing mining facilities. OCIR has principal offices in Atlanta, GA with facilities in Wyoming. The firm was technically established in 2013, but its predecessor company had operated the same facility since 1962.
OCIR's well-established parent (OCI Chemical) and lengthy history offer a strong likelihood of stability in the future. OCIR's revenues are dependent on worldwide soda ash demand, which is expected to increase 5% annually through 2017. The price of soda ash does have a history of fluctuation, but there should be no dramatic decline in demand, since it remains critical to the processes of manufacturing paper and glass, among other products. OCIR also is known for its extremely efficient soda ash production process.
The company has customer base exceeding 75 firms, including glass manufacturing companies like Owens-Illinois (OI) and Guardian Industries and chemical manufacturing companies like Procter and Gamble (PG) and Church and Dwight (CHD).
OCIR's Wyoming facility has proven reserves of trona to permit operations to continue for an estimated 35 years, so there's no risk of the price dropping due to concerns over failing supply in the foreseeable future. Mining is a highly dangerous business, and accidents can be damaging both to a company's reputation and to its stock price; in 2012, 177 mining fatalities occurred on the job. Many more miners were injured or fell ill. OCIR has a strong safety track record relative to its nearby competitors.
OCIR faces a number of competitors, including some that are better capitalized than OCIR. These competitors include FMC Corp (FMC), Tata Chemicals, and Solvay Chemicals (SOLB). OCIR can also expect stiff competition from emerging Turkish and Chinese soda ash firms in the near future.
OCIR's parent, OCI Chemical, and OCI Wyoming handle the majority of the management of the company. Kirk Milling, President and CEO of OCI Chemical, has been a chemicals executive for 25 years, and has been with OCI Chemical for 15 of those years. He holds a BS in Biochemistry and an MBA - in other words, Mr. Milling is an executive with a real understanding of his company's activities.
Additional disclosure: This article was written for informational purposes and is partially based on the company's S-1. Investors should consult with their financial adviser and read the S-1 before making any investment decisions.