Nothing Fake About Rentech's Value

Investors would be wise to take a very close at Rentech (RTK), which is a special situation investment play. Trading at $1.58 a share or a market cap of $352 million, Rentech's marketable assets are worth nearly $450 million, nearly 30% above the company's current market cap. Add in another $150 million or so in net cash on the balance sheet and you have a business that aside from operations should be worth more than $500 million, or a 50% upside, if the company announced a liquidation tomorrow. In an optimistic scenario, shares could be worth closer to $3, nearly 100% above today's levels.

Rentech provides clean energy solutions through the production of synthetic fuels. Unsurprisingly, this business is not yet commercially viable for Rentech. For the last three years ending Sept. 30, Rentech has lost money at a growing clip. Management now seems to understand the business and plans to reduce capital expenditures by 85% in fiscal 2012, which should bring cap-ex to less than $10 million from $39 million in fiscal 2011. R&D expenses are expected to decline some 50% in fiscal 2012. Before management made the decision to significantly cut back on expenditures, I would have argue that the business was eroding value....436 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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