Monday, November 27, 2006

Calls of Note Part 5

- Goldman Sachs is adding Celanese (NYSE:CE) to the Americas Conviction Buy List as they believe shares will trade up to their $29 price target (35% potential upside) as the company continues to demonstrate the resiliency of its earnings stream, justifying a potentially higher multiple. In firm's view, valuation metrics have failed to reflect positive industry fundamentals due to mischaracterization as a pure commodity chemical company and the financial sponsor overhang. A more aggressive debt paydown schedule and a tight acetyls market should lead tobetter-than-expected earnings growth. GS is raising their 2007/2008 EPS estimates by $0.05 to $2.90/$2.95, respectively.

Catalyst: Firm expects the December 13 investor day in New York to be a positive catalyst as they expect management to provide a favorable outlook for acetyls through at least 2009. In addition, the financial sponsor's stake is slowly diminishing, with Blackstone now owing just 15% (or 24 million) of outstanding shares.

Notablecalls: Expect to see buy interest in CE today but keep it on a tight leash as the stock has been vertical lately.

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