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Potash cut at UBS

Globe and Mail Update

Potash Corp., the world's largest fertilizer company, was cut Monday to “neutral” from “buy” at UBS Securities Canada Inc. after the stock's recent and rapid run-up.

Shares of Saskatoon-based Potash have climbed 14.6 per cent in the last month and are now more than 20 per cent above their late-November lows, UBS analyst Brian MacArthur wrote in a note to clients. “Given the recent positive share price performance we are downgrading the shares from Buy 2 to Neutral 2.”

Potash stock sank 1.47 per cent in early Monday trading on the Toronto Stock Exchange but reversed course and closed 39 cents or 0.36 per cent higher at $108.92. Soaring commodity prices helped send the stock to $137.99 on Aug. 12 but an October profit warning sent the stock to a 12-month low of $84.76 on November 30.

In New York, Potash shares climbed $1.58 (U.S.) or 1.67 per cent to $96.05 on Monday. They have risen 17.8 per cent so far this year.

Mr. MacArthur left his $105 (U.S.) stock target unchanged, saying he believes Potash's low-cost reserves and leadership position in the industry justify his price-to-cash-flow multiple of 11 times earnings.

“While first-quarter 2006 results could be weak due to deferred purchasing, longer term we believe Potash Corp. will continue to benefit from its leadership position in the potash market, an improving phosphate market, and from its low cost Trinidad nitrogen production.”

On Friday, Potash doubled its stake in the spun-off fertilizer arm of Chinese state-owned Sinochem Corp. to 20 per cent, giving it a key foothold in the world's biggest market for potash.

Mr. MacArthur said the acquisition will “solidify” Potash's reach into one of the world's fastest-growing agricultural markets.

Analysts who follow Potash stock are split on its merits as investment. According to those tracked by Bloomberg, three have the equivalent of a “sell” rating, three have a “buy” and four have a “hold.”

© The Globe and Mail

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