TMS International Postpones $554 Million IPO

Mar.20.11 | About: Sims Metal (SMSMY)

On Friday March 18 TMS International (TMS) postponed its scheduled $200 million IPO, that would have had a market capitalization of $554 million at the price range mid-point of $16.

Conclusion (written prior to the postponement)

TMS is an overpriced leveraged buyout bailout, with 50% of IPO proceeds going to selling shareholders. TMS also is over-leveraged in both the balance sheet and income statement. For example, for the December 2010 fiscal year TMS earned $7 million and paid $40 million in interest expenses, not a good ratio.

Over the last three years TMS only made a profit in three most recent quarters. But, revenue and EBITDA trended down for both the Sept & Dec quarters. TIMS’s P/E ratio for the trailing 12 months is 79, the P/E ratio annualizing the December quarter is 55, both high for TMS's prosaic business.

Comparing valuation ratios for Sims Metal Mgt (SIMS), mentioned in the S-1 filing as a competitor, TMS does look overpriced. SIMS trailing P/E for its annualized December 2010 results is 34, price-to-book value is 1.2, price-to-tangible book value is 1.9.

Those ratios compare to TIMS's price-to-book of 2.6 and a negative -2.9 price to tangible-book value, not good.

TMS Valuation Metrics

. Scrap management and preparation;
. Semi-finished and finished material handling;
. Metal recovery and slag handling, processing and sales;
. Surface conditioning;
. Raw materials procurement and logistics; and
. Proprietary software-based raw materials cost optimization.

OVER THE PAST SIX YEARS -- TMS has expanded the number of customer sites at which TMS operates from 64 to 73, only a 14% expansion over six years. During the same six year time frame. TMS increased the average number of services offered at customer sites from 2.0 to 2.3, only a 15% increase over six years.

LEVERAGED BUYOUT -- TMS was a leveraged buyout by Toronto-based Onex Partners in 2007. Onex shares trade on the Toronto Stock Exchange under the stock symbol “OCX.”

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.