On May 21, Alpha Now reviewed earnings prospects for Eike Batista’s OGX Petroleo (OGXP3.SA) here, particularly focusing on the company’s debt levels. Fast forward three months and the situation has worsened significantly.
Reuters reports the Brazilian billionaire is now looking for buyers for OGX, as well as for other companies in his stable: MMX (iron ore), OSX (ship building) and CCX (coal mining). OGX shares are down 38% since the article and down almost 94% over the last two years.
Source: Eikon
Has the stock stabilized? Well StarMine’s models still point to extreme caution, with the company’s Earnings Quality in particular remaining a concern. The company’s cash flows do not come close to covering its high levels of capital expenditure.
Source:Eikon
Challenging debt levels
As was the case in May, our credit models also point to challenges with the company’s debt levels. StarMine’s Smart Ratios model, which is a quantitative ratio analysis of the sustainability of its debt, has now moved to CCC, from BB two years ago; this is in line with S&P’s long term issuer rating of CCC-. Other model scores also point to concerns, with the company showing unattractive valuation scores, as well as continued analyst downgrades.
Source: Eikon
While veteran dealmaker Batista continues to work with his banks and bondholders, it would seem best to sit and observe from the sidelines. For the time being, OGX’s future remains deeply uncertain.
Receive stories like this to your inbox as they are published. Subscribe here and follow us @Alpha_Now on Twitter or check out the Eikon blog. If you are looking to access our data or analytics, register for a free trial.
