AKS - Embedded Expectations Analysis - 2018 06 04
AK Steel Holding Corporation (AKS:USA) currently trades at a material discount to Uniform Asset values, with a 0.7x Uniform P/B. At these levels, the market is pricing in bearish expectations for the firm, which, despite management's negative sentiment, likely supports longer-term outperformance should AKS succeed in just expanding profitability from currently muted levelsSpecifically, management may have concerns about their contract negotiations later this year, particularly with regards to their auto contracts, and may lack confidence in their claim that their strategic initiatives have positioned them well for the future. Additionally, they may have concerns about the impact of chrome on their declining year-over-year EBITDA margin, and may lack confidence in their ability to meet their debt-to-EBITDA target of 4x. That said, the firm currently trades at a material discount to Uniform Asset values. At these valuations, should the firm improve Uniform ROA from currently muted levels, equity upside is likely warranted
AK Steel Holding is a producer of flat-rolled carbon, stainless and electrical steels products primarily for the automotive, infrastructure and manufacturing, and distributors and converters markets through its wholly-owned subsidiary, AK Steel Corporation. The company's other subsidiaries also provide customer solutions with carbon and stainless steel tubing products, solutions, tool design, hot- and cold-stamped steel components and assemblies. The company sells its carbon steel products mainly to customers in North America, and it sells its electrical and stainless steel products primarily in North America and Europe. The company also produces metallurgical coal through its AK Coal Resources, Inc. subsidiary.
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