NBF take:
Our view on balance sheet effectively unchanged ...
In conjunction with this announcement, our discussion with
management suggests our prior Q4 utilization estimates are
too high. As a result, we are trimming our forecasts, but our
stance on the balance sheet (strained but manageable)
remains unchanged. For details, please see Exhibits 1 and 2.
… but we think corporate strategy is under review.
While we do not interpret this departure as a negative vote
vis-à-vis the recently announced and subsequently cancelled
public offering of debt, we do believe it signals a corporate
strategy under revamp. It is too soon to ascertain the likely
outcome of a strategic re-focus or potential impact on current
equity holders, and hence we move to the sidelines.
Moving to Sector Perform on heightened uncertainty.
Our target is trimmed modestly as we pull back EBITDA
forecasts largely on utilization reduction in Q4 and Q1. More
notably, our shift to a Sector Perform is predicated less on the
potential absolute return to our target price and more so on
the unquantifiable uncertainty surrounding a corporate
strategy in flux. We believe that an investment in TID
represents a call option on a currently undetermined growth
path; we would revisit our rating if the visibility on TID’s
expansion became clearer.
