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   Non-TechUAN - The variable distribution MLP that could go a long way


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From: Elroy8/25/2021 5:38:26 PM
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There are weekly articles about retail fertizer prices. UAN sells wholesale, so the prices are very different from what UAN might received, but the trend (up or down) is good to follow.

DTN Retail Fertilizer Trends
No Major Price Increases as Fertilizers Maintain Upward March


https://www.dtnpf.com/agriculture/web/ag/crops/article/2021/08/25/major-price-increases-fertilizers




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From: Elroy8/26/2021 11:00:51 AM
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“This turnaround deferral should also position us to capitalize on the strong margin environment we are currently seeing for both ammonia and UAN.”


Hmmm, with ~$2.50 in one time charges last Q and UAN at $237/ton they distributed $1.72.


UAN is now above $300.


The one time charges should not recur, that's why they call them one time.


Maybe this company will distribute $5.00 in Q3?


It seem really undervalued to me. I wonder why the rest of the market doesn't see what I see. That sentence in the press release confirms the strong fertilizer environment.

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To: Elroy who wrote (166)8/26/2021 12:07:44 PM
From: Lesser_Ape
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I think it's a nice example of a failure in efficient market theory.

IMO, the lack of attention is because:
  • it's an MLP, which has complexities that regular public companies don't
  • it's small, so nobody is paying much attention
  • it doesn't screen well--it'll fail screens that filter for high dividend yield
  • it's in a cyclical market and people are worried the commodity will collapse

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To: Elroy who wrote (166)8/26/2021 12:19:35 PM
From: Paul Senior
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Some possible reasons:

1. If somebody were interested in dividends -- high dividend yielders -- and they were scanning for that, it's not likely the data providers would show anything now other than $1.72 annualized, imo.

2. When the second "dividend" shows up, that will bring the yield very good for dividend seekers. Except that the people seeing that that is new, and so they would have to consider whether it's sustainable over many quarters.

3. People look and they will see: It's not a "dividend" they're getting, but a distribution. Along with a K-1. They have to ask themselves, do they really want to be involved in a limited partnership (MLP) and the tax implications that entails?

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To: Lesser_Ape who wrote (167)8/26/2021 12:21:40 PM
From: Elroy
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Perhaps. I know all of that stuff, and I think it's a great investment.

The only big item on your list is "commodities will collapse", which means investors believe the price of fertilizer will decline.

That would ruin the UAN story. Lower fertilizer prices = less or no profits = zero distribution.

Fine.

However, fertilizer prices are still moving higher, and we are two months away from the seasonal period when fertilizer prices always rise. So.....I'm pretty sure fertilizer prices in Q2 2022 will be much above the current forward Q2 2022 fertilizer price, which is around $320/ton.

Again, we can all think of what is causing others not to buy UAN, but ...... to me, the bear story doesn't make any sense.

For Q3 2021 UAN will probably distribute $4.00, or more. It's very clear. And then, after that announcement, and the clarity that future distributions are likely to be at the same level, or more, the market will bid UAN units up $20?

I thought the market was forward looking? I'm NO fertilizer expert, and the outlook is obvious.

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From: Elroy8/26/2021 5:31:49 PM
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This page updates at about 2pm West Coast time each day.

It contains the pricing for the UAN futures contracts that traded during the day.

Q1 is above $330/ton for UAN fertilizer now.

It tells us where fertilizer pricing is going.

We are now in the weakest season for fertilizer. There is no fresh planting now. The current buyers of fertilizer are restocking what they sold in Q2 planting season, in preparation for future sales. Prices are weak, until November when they start to rise as customers buy from spring planting season.

Nevertheless, prices are going up. Above $300/ton for UAN fertilizer, UAN the MLP will shit money like there is no tomorrow.

cmegroup.com

Why the market doesn't see this is also beyond me. I'm not a fertilizer expert, and I know this. Where are the agriculture investment specialists?

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To: Elroy who wrote (169)8/27/2021 9:04:46 PM
From: Area51
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I think it requires more patience. If you are backword looking UAN it doesn't look cheap now (EV = 1.2 billion, 6 month EBIDTA is 56 million and 12 month TTM is lower than that I presume; so EV/EBITDA is > 10). And company doesn't have any decent brokerage coverage. UAN should look cheap by the end of the fiscal year I predict (EV = 1.2 billion, with Publius FY 21 EBIDTA estimate of 337 million would be EV/EBITDA of 3.7 at the current price, and if you annualize second half EBIDTA it should look very cheap at its current price.

But you are right that we need to look forward - the point is that 3Q is the quarter that they will finally print a clean quarter reflecting ALL of higher spot prices. Will the market start to finalize capitalize some of this? Of course totally TBD but I like the setup here. If it pulls back to the 50 area again I'll add a few calls, but if it flies straight to an EV of 8 x 337 million that would make be very happy even with just my current position.

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To: Area51 who wrote (171)8/27/2021 11:01:09 PM
From: Elroy
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If you are backword looking

On what planet is the stock market "backward looking"?

I'm not fertilizer expert, and it's obvious to me that this MLP is going to produce massive distributions over the next four quarters. It's obvious.

Are we to assume that the rest of the market does not know what we know?

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From: Elroy8/29/2021 4:25:20 PM
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I've read this storm Ida is moving right through some of competitor CF's UAN and Urea manufacturing plants.

This coming week could be interesting.....

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From: Elroy8/31/2021 7:02:37 PM
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New survey forecasts 2% increase in 2022 corn planting

farmprogress.com

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