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Ternium S.A. Message Board

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  • mmports2010 mmports2010 Dec 7, 2010 8:51 PM Flag

    Dec 6 Barclays call on TX - Buy TX into the bounce: 1-OW

    Concerns on its capex plans are exaggerated – We welcome the leverage. Ternium’s current net cash position amounts to US$300mn, and we believe market participants may be excessively discounting the company’s sub-optimal capital structure. In our view, the resumption of its capex plans may provide a positive catalyst to shares and some of the alternatives under study include: (i) a greenfield slab project in Brazil (most likely); (ii) brownfield crude steel expansions in Argentina; (iii) further downstream rolling capacity additions in Mexico/Argentina; and (iv) upstream investments to enhance its iron ore mining operations in Mexico. Some investors are concerned with the possibility of the company engaging in a large greenfield slab project in Brazil due to high execution risks, the significant capex burden and weak fundamentals of the slab market. Nevertheless, in our view, there are a few aspects which are being overlooked, including: (i) this project would face lower volumes risk, as the output would be directed to tap Ternium’s current slab deficit (feeding rolling facilities in Mexico); (ii) the project’s lead-time would be greater than three years, and we expect global markets to be more balanced by then; (iii) this project might enable the company to participate in the significant long-term growth potential of the
    Brazilian steel market; and (iv) a higher proportion of results derived from Brazil may demand a lower country-risk for the company.

16.46-0.29(-1.73%)Jan 23 4:02 PMEST

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