Methanex's plant in New Zealand
With methanol prices recovering, the company has restarted construction of a new plant and tripled its dividend
The stock: The fact that Methanex Corp. (TSX:MX, NASDAQ:MEOH) happens to be based in Vancouver goes back to its origins in a single plant in Kitimat using natural gas feedstock from Alberta to manufacture methanol for export to global markets—a kind of precursor to today’s liquefied natural gas push. Today, the company is the world’s largest producer of the chemical, with plants in Canada, the U.S., Chile, Egypt, New Zealand and Trinidad. It also runs a shipping company for transporting the product, a minority stake in which was recently acquired by Mitsui O.S.K. Lines of Japan.
Methanol is an ingredient used in various consumer and industrial products as well as a fuel additive. Its price tends to be volatile—it dropped by half to around US$200 a tonne last year—but is not strongly correlated to other commodities, making MX attractive to investors as a diversifier. That is, when all your oil and gas stocks are in the tank, Methanex might be riding high.
The drivers: Methanex lost money over the past four quarters, but that’s expected to change as methanol prices recover. The company announced last week it is restarting construction on its Geismar 3 project in Louisiana, which was shelved amid the uncertainty of the COVID-19 outbreak last year. Methanex intends to build a smaller, less expensive but highly efficient plant that will begin manufacturing methanol in late 2023 or early 2024.
Methanex also announced last week it will more than triple its quarterly dividend, to US12.5¢ per share. Though the company’s shares are down year to date, they are up more than 55 percent since this time last year and well ahead of its chemical industry peers. They closed at $40.67 on the TSX Tuesday.
Word on the street: “G3 will boost Methanex’s global methanol market share and sphere of influence, and as a result, potentially allow Methanex’s realized discount to its contract prices to improve over time,” wrote Scotia Capital analyst Ben Isaacson, who has a US$40 target for the stock, in a note to clients.
Coming & going: Victoria’s Aurinia Pharmaceuticals (TSX:AUP) is dropping its Canadian listing as of July 30, claiming the 6 percent of its share float this side of the border is not worth the extra expense and administration. The company will continue to trade on the Nasdaq exchange under the symbol AUPH.