Replies to post #813 on REX American Resources (REX)

[value1008]

Good post, Selett... i agree with your oil prognostications and if/when oil heads to mid-$30s, i'll likely be buying REX hand over fist.

I've been running different financial scenarios and i think that going forward, say, in Q1 (Feb-March-April) they can still be very profitable (i.e., EPS well over 2.00) at $1.60/gal ethanol, $3.90/bushel corn (REX's price, not the somewhat higher CBOT price for corn), natgas below $3.50, and DDGs selling at $140/ton or better (currently back up at $175/ton according to DTN reporter Cheryl Anderson because of renewed China buying).

My EPS models assume that REX gets their share-count down to around 7.5M shares --i.e., that by Q1 they have re-purchased 500k out of the 600k allowable shares.

So, for example, they only need to spend $11 million to buy back 200k shares at current prices of $55/share. They easily could have spent $18M to buy back 300k shares at recent prices averaging around $60/share in Dec..

Remember that on the earnings call for Q2, CEO Rose was talking about how it would likely cost $200M to build a new 100M gal (nameplate capacity) Fagen/ICM plant.

Short of that, as discussed on Q3 earnings call, the co. does just as well, he said, to grow EPS simply by buying back shares at these depressed shareprices.

So spending $29M to repurchase 500k shares would be a very wise move, almost guaranteeing that all future quarters with sub-$4/bushel corn prices and ethanol at least $1.50/gal would yield qtrly EPS over 2.00.

And with corn at, say, $3.60 for REX, and ethanol back up to, say, $1.80/gal, they could obviously make a lot more EPS.