UPDATE: J.P. Morgan Initiates Taminco at Neutral on Alkylamine Market Leader Position

In a report published Tuesday, J.P. Morgan analyst Jeffrey J. Zekauskas initiated coverage on Taminco (NYSE: TAM) with a Neutral rating and $17.00 price target.

In the report, J.P. Morgan noted, “Taminco is the world's largest producer of alkylamines, which are largely intermediate chemicals derived from methanol and ammonia sold to industrial customers. Taminco is the key participant within a consolidated industry structure because of its scale and focus on alkylamines. TAM's capacities and core focus should allow it to increase its volumes in excess of industry growth, and also in excess of rates of expansion of global GDP. The key end markets of Taminco, in order of size, are agriculture, animal nutrition, personal and homecare, water treatment and energy. Taminco is a profitable company with EBITDA margins in excess of 20%. The company benefits from low-cost raw material contracts, and manufacturing scale and vertical integration. Many customer contracts contain raw material pass-through structures, providing the company a consistency and stability of margin. TAM is a reasonable generator of free cash, which is directed to debt repayment as Taminco has a meaningful financial leverage with a 62% net debt-to-total capital ratio as of the end of 2013. Taminco shares trade currently at a similar but higher valuation to Celanese and Eastman Chemical, which we view as primary comparables, while the company has a more leveraged balance sheet and lower level of free cash flow. We think an EV/EBITDA multiple comparable to CE's and at or below EMN's is appropriate and assume a 2014E EV/EBITDA multiple of 7.0x to derive our year-end 2013 price target of $17. Accordingly, we initiate coverage of Taminco with a Neutral rating.”

Taminco Corporation closed on Friday at $17.40.