SLCA

US Silica Holdings Inc

Energy


Presented:06/22/2017
Price:$32.40
Cap:$2.66B
Current Price:$15.49
Cap:$1.14B

Presented

Date06/22/2017
Price$32.40
Market Cap$2.66B
Ent Value$3.80B
P/E RatioN/A
Book Value$15.71
Div Yield0.74%
Shares O/S82.24M
Ave Daily Vol2,797,543
Short Int17.89%

Current

Price$15.49
Market Cap$1.14B
U.S. Silica Holdings, Inc. engages in the production of industrial minerals, including sand proppants, whole grain silica, ground silica, fine ground silica and aplite clay. It operates through the Oil & Gas Proppants and Industrial & Specialty Products segments. The Oil & Gas Proppants segment serves the oil and gas recovery market providing fracturing sand which is pumped down oil and natural gas wells to prop open rock fissures and increase the flow rate of natural gas and oil from the wells. The industrial & specialty products segment consists of products and materials used in a variety of industries including, container glass, fiberglass, specialty glass, flat glass, building products, fillers and extenders, foundry products, chemicals, recreation products and filtration products. The company was founded on November 14, 2008 and is headquartered in Frederick, MD.,00DC0M-E

Publicly traded companies mentioned herein: Fairmount Santrol (FMSA), Hi-Crush (HCLP), Smart Sand (SND), US Silica Holdings Inc (SLCA)

Highlights

The presenter is short shares of US Silica (SLCA) at $32-33 because he sees the increasing supply of frac sand - a true commodity product - creating unavoidable headwinds for the business. SLCA generated revenue of $560mm in 2016, and ~65% was from the sale of oil and gas proppants (frac sand). It is the largest company in this niche of the oil and gas services industry at a $2.7 billion market cap, and while short interest is elevated at ~18% (of the float), the presenter thinks the risk/ reward is favorable. Based on his model, it will be difficult for the company to grow EBITDA above $300mm if the price of oil remains range bound and an increasing supply of frac sand comes online and pressures prices. The Street has EBITDA growing >70% from 2017 to 2018, from ~$320mm to $550mm; and earnings growing over 100% from $1.63 in 2017 to $3.66 in 2018. At a more reasonable 6.5x multiple to forward earnings (using the Street estimates, to be conservative) the stock is worth ~$10 less per share than it trades for today.

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