SA News • Thu, Nov. 13
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Ryerson Holdings: Cheap Turnaround Play On The US Metal Demand Recovery
- Ryerson Holdings (US based metal distributor) offers an excellent opportunity to take part in the recovery of US metal demand growth in a less price sensitive way.
- Investors are waiting on the side-lines raising concerns over its high leverage, falling sales and cyclicality of the industry.
- RYI will benefit from volume growth over impending recovery in industrial activity, while its margins would improve on product mix shift and cost cutting efforts.
- Counter cyclical business model would help generate cash flows to delever.
- Current valuation attractive and trading at a steep 50% discount to its closest peer Reliance Steel.
- RYI has greatly and grossly utilized an accounting rule that allowed the company to realize massive amounts of income tax benefits that substantially drove net income the last three years.
- RYI has an extremely efficient set of operations that is unable to manage sales growth consistently and should post a huge net loss full year.
- Without use of its accounting bazooka, RYI should see the largest swing from net gain to net loss in company history at year end.
- Believes it is one of the largest processors and distributors of metals in North America measured in terms of sales, with global operations in North America, China and Brazil.
- Steady decline in rev & gross profit.
- Low gross profit of 17%, very highly leveraged, interest payments are 92% of operating earnings.
- RYI, a processor and distributor of metals in the United States, China, and Brazil, plans to raise $204 million in its upcoming IPO.
- Though RYI's net sales have fallen over the past three years, net income has improved over the same period.
- Many of RYI's competitors may benefit from the purchase of greater percentages of foreign steel for use in their products, which may lead to lower costs.
- We are neutral on this IPO and suggest investors hold off for more promising picks this week, such as ICD.
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Thu, Nov. 13, 6:47 AM
Thu, Aug. 14, 8:55 AM
May. 7, 2010, 7:18 AM
RYI vs. ETF Alternatives
Ryerson Holding Corp is a North American processor and distributor of metals. Its product includes Carbon Steel Flat, Carbon Steel Plate, Carbon Steel Long, Aluminum Flat, Aluminum Plate, and among others.
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