- U.S. Silica (SLCA -4%) and Fairmount Santrol (FMSA -4.1%) are reinitiated with Overweight ratings at KeyBanc, which notes that frack sand names have been the worst performing oilfield service subsector YTD, down 27%.
- KeyBanc believes it now sees compelling valuation entry points, as shares imply just 4.7X estimated 2018 EBITDA, at the lower end of its 4.5x-11x range of the past few years.
- The firm expects tightness heading into year-end around highly demanded 40/70 sand that comprises 30% of SLCA’s and 45% of FMSA’s capacity given that shale plays use 45%-55% of 40/70 mesh in their completions.
- On SLCA, the firm says the company's "combination of attractive Northern White sand capacity and growth forays into in-basin Permian sand should allow for superior growth and attractive free cash generation in the coming years."
- Now read: U.S. Silica - Risk-Reward Improves Dramatically Despite Increased Uncertainty
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