Wednesday, January 22, 2014

Seeking Alpha: KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

KMG Chemicals (KMG) is a small player in the specialty chemicals space, with only about $350 million in annualized revenue and about half that amount of market cap. Despite this limited scale, KMG is a significant player in parts of the electronic chemicals and wood treatments markets. Improvements in the consumer electronics market, coupled with synergies from the acquisition of a business from OM Group (OMG) should drive improving results in the coming years, and management is hoping to augment this with the acquisition of a third standalone unit.

KMG Chemicals has established sizable market positions in its targeted markets, but it is not so clear that those are valuable markets for the long term. With that, KMG's financial performance has been erratic and the stock is barely followed on Wall Street. I'm optimistic that a turnaround in the chip space, coupled with merger synergies, can drive better near-term performance but investors need to consider the ramifications of the company's preference to focus on established markets when evaluating this as a potential long-term holding.

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KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

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