- Braskem SA is a petrochemical company. It produces a diversified portfolio of petrochemical and thermoplastic products, thermoplastic resins, including polyethylene, polypropylene and PVC.
- BAK produces polypropylene in the United States and Germany, and produces, operates, and sells ethylene, HDPE, and LDPE in Mexico. The company also imports and exports petrochemicals, and fuels.
- Seven points to BAK success: (1) Declining Dividend Yield; (2) Surging Momentum; (3) Price Upsides; (4) Net Gains; (5) Consistent dividends; (6) Pessimistic Analysts; (7) Fortuitous financial events.
- This basic materials equity shows positive beta numbers. Share price has gained 266% from $12 in February 2016 to nearly $32 February 2018; annual dividend yield has crashed from 10% in July, 2016 to 2.8% in 2018.
- Six analysts cover the stock and forecast a $32 price upside to 2019. A repeat of the past year price performance projects a possible BAK price gain to $38 or more.
Seven Points of Braskem Success As Noted 3/6/18
1. Declining Dividend:
BAK Yield dropped from 10% to 2.82% between July 2016, and December 2017. There were two causes. First, single share price averaged $14.84 in 2016 and two dividends were paid out, one in April and another in October. Second, BAK share price jumped to $26.74 in December 2017 and only one dividend was paid out as BAK settled corruption lawsuits in addition to dividend reckoning.
2. Surging Momentum:
Growing from just being Brazil's largest Chemical company valued at 1.6B in 2009, to becoming the worlds seventh largest by 2018 and increasing it's Market Capitalization to $13B by 2018 is truly a surge. Along the way BAK acqired facilities and expanded production in Mexico, Texas, and Germany.
3. Price Upsides:
Key dates and prices since 2015:
(Low= $6.83 8/4/15; High=$31.99 1/24/18)
4. Net Gains:
On January 17, Investors Business Daily (IBD) reported:
IBD's proprietary RS Rating tracks market leadership by using a 1 (worst) to 99 (best) score that shows how a stock's price performance over the last 52 weeks matches up against that of all other stocks.
Over 100 years of market history reveals that the stocks that go on to make the biggest gains typically have an RS Rating of over 80 in the early stages of their moves.
Earnings growth dropped in the company's most recent report from 165% to -7%, but revenue rose from -2% to 24%.
The company holds the No. 9 rank among its peers in the Chemicals-Basic industry group. Westlake Chemical (WLK), Huntsman (HUN) and LyondellBasell (LYB) are among the top 5 highly rated stocks within the group."
5. Variable dividend history:
Date Price A or SA Dividend
4/16/14 $14.19 $0.5396
4/10/15 $07.59 $0.4012
4/7/16 $12.43 $0.7126
10/06/16 $15.14 $0.7795
12/8/17 $26.25 $0.7547
6. Over-pessimistic analysts:
Six brokers cover Braskem (NYSE:BAK) price movement. Three currently rate the equity at "buy" or 1.5 on a 1 (strong buy), to 5 (strong sell) scale. Two analysts currently rate it "outperform" at 2.0, and one rates it 'hold' or 3.0. Their consensus number is 1.67 in the outperform range. Those six analysts' median target price for 1 year is cast at $32. The author's year-over-year momentum target puts the price at $38.
7. Fortuitous financial events:
Credit issues bother any fast growing organization. On January 24, Reuters stated:
"Brazilian petrochemical producer Braskem SA is in talks with banks to secure a $1 billion revolving credit facility for five years, a person familiar with the negotiations said on Wednesday.
The new credit line would replace one for $750 million expiring in December, said the source, who requested anonymity because of not being authorized to speak publicly on the matter. (Reporting by Gabriela Mello Editing by Chizu Nomiyama)"
A class-action lawsuit in the U.S. was aslo reported settled. On February 21, Reuters stated:
"Brazilian petrochemical producer Braskem SA said in a securities filing on Wednesday a U.S. court has approved a proposal to settle a class action lawsuit with a $10 million payment.
Shareholders that acquired American Depositary Receipts of the company will be entitled to the payment, the filing said. (Reporting by Tatiana Bautzer; editing by Grant McCool)"
Buy Braskem (BAK) at any price pull-back below $30.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.
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This article was written by
Fredrik Arnold is a retired quality service analyst sharing investment ideas with a primary focus on dividend yields by utilizing free cash flow and one-year total returns as trading indicators.He is the leader of the investing group The Dividend Dog Catcher, where he shares a minimum of one new dividend stock idea per week with focus on yield or extraordinary financial circumstances. All ideas are archived and available after weekly announcement. Learn more.
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