OCI Resource’s IPO is expected to hit the market by the end of the week and analysts at The Lexington Group are giving it a buy rating. The company has a strong customer base, experienced management, and substantial mineral reserves.
OCI Resources is an American soda ash production division of Korea's OCI Chemical. They are planning to rise to $100 million by offering 5 million shares in a price range of $19 to $21. As $20 a share OCI Resources would have a market value of $400 million. Citi Group, Goldman Sachs, Barclays and Credit Suisse are underwriting the IPO which is expected to be listed on the stock exchange on Friday, September 13.
While OCI Resources is a new company, their predecessor had been in business since 1962. OCI Chemical, the parent company, has a long history of strong operations, causing The Lexington Group analysts to believe that the company will continue to be stable. Analysts at The Lexington Group have identified the company's strong management team, stable long lasting customer relationships and the cost advantage of producing soda ash from trona as well as offering $0.50 dividend per quarter as making it a suitable investment for our clients who are looking for significant yield in this low interest rate environment.
A risk with many mining companies is that their mine will eventually run dry, but this is not the case with OCIR. They have proven that there enough trona reserves in the ground to substantial the company for another 33 years with an additional probable reserve to last another 35 years. The demand for soda ash is expected to increase 5% per year through 2017.
OCIR stable customer base of glass and chemical manufacturers, their substantial mineral reserves, solid management team, and projected 10% annual yield make the company a strong buy in their projected price range according to The Lexington Group's analysts. We are recommending it to clients who can handle some risk, which come inherit with IPOs and are looking for substantial dividends.