On Friday, November 21, 2008 we recommended Rentech (Ticker: RTK) with
a buy rating at .50 cents a shares. Wednesday, January 07, 2009 the
stock closed at .88 cents a share; a total return of 76.00% since
original date of recommendation. We continue to see significant upside
potential from here and we’re maintaining our buy recommendation.

Company: Rentech
Ticker: RTK
Recommendation: Buy for an aggressive short-term trade
Company Snapshot: Rentech is composed of two business segments each
focusing on a major global issue, alternative green energy and
fertilizer production. The Rentech Process can convert a wide array of
carbon-bearing materials, including green resources such as biomass
and municipal solid waste, into ultra clean fuels and chemicals
ranging from jet fuel to diesel gasoline. Rentech Energy Midwest Corp.
-REMC-, located in East Dubuque, IL is one of the country’s largest
nitrogen manufacturers producing nitrogen-based fertilizer products
and industrial nitrogen products.

Significant developments that we feel will continue to move the stock
include:

Wednesday, January 07, 2009 Mutual Fund Facts About Individual Stocks
-MFFAIS- reported that the number of institutional owners was 113.
This represents a 39.5 percent increase from the figure reported
Friday, November 21, 2008 of 81.
Institutions adding to an already existing position include:
Goldman Sachs added 825,221 shares
Vanguard Group added 5,662,885 shares
Barclays Global Investors added 1,918,971 shares
Credit Suisse added shares
Putnam added shares
Oppenheimer added shares
Northern Trust added shares
Bank of New York Mellon added shares
Bank of America added shares
Wells Fargo added shares
http://www.mffais.com/rtk.html

On December 15, 2008 Rentech reported record revenue for its fiscal
year 2008, $211.0 million compared to $132.3 million for the prior
fiscal year. Rentech also provided very favorable EBITDA guidance
stating that fiscal year 2009 will be in excess of $50 million.
http://rentechinc.com/pdfs/4Q08+Earnings+Release+FINAL+12-15-08.pdf

Obama’s trillion-dollar plus stimulus package with a portion focusing
on energy independence will present an opportunity for Rentech to
receive significant funding and government support for many of the
projects they are working on that will dramatically increase revenue.
Current projects include:

* Standalone Biomass Facility – Jet Fuel from Garbage
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

* Rentech Strategic Fuels and Chemicals Complex in Adams County
Mississippi
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

* Rentech and Peabody Joint Development Agreement
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

* Rentech and UOP Agreement
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

* Rentech-Mingo County Redevelopment Authority Joint Development
Agreement
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

* DKRW-Wyoming Fischer-Tropsch (FT) Coal-to-Liquids
http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle_...

The newest war in the Gaza Strip between Israel and the Palestinians
represent a serious threat to the production and disruption of oil
from the Middle East as the war intensifies. Higher oil prices and
increased uncertainty as to a stable oil supply will place more
pressure on energy independence from foreign oil thus benefiting
companies like Rentech who are offering proven alternative energy
solutions.

Numerous valuation models work with a multiple of EBITDA. In a healthy
economy it’s not uncommon for a company to sell for 7x forecasted
EBITDA. During economic downturns forecasted EBITDA will come in
lower, thus providing a lower valuation, but for the most part a
figure around 7x EBITDA is still used. Given current economic
conditions we are seeing valuations of less than 7x EBITDA and in
extreme cases we are seeing a 3.5x EBITDA used for valuation purposes.

At 7x $50 million projected EBITDA we see that Rentech has a price per
share of $2.11 and at 7x $60 million projected EBITDA Rentech has a
price per share of $2.53. Using the lowest of the ranges we see that
3.5x $50 million projected EBITDA Rentech should be trading at $1.05
and at $60 million projected EBITDA Rentech should be trading at $1.27
per share.

There’s been a dramatic drop in fertilizer prices over the last 7
months as reflected in the significant drop in price of fertilizer
stocks. Because the stock market is forward looking these market
events were priced into the stock months ago. It’s old news. From here
we could easily see an upward movement from current levels as the
credit markets return to normal thus leading to valuation models back
in the 5x to 6x range. Currently Rentech and other fertilizer
companies are undervalued and trading at a discount.

x EBITDA        | 50 EBITDA |   60 EBITDA |     50 EBITDA SP |  60 EBITDA SP
______x7         350,000,000     420,000,000    ..……..$2.11          ……..$2.53
______x6         300,000,000     360,000,000    ……….$1.81          ……..$2.17
______x5         250,000,000     300,000,000    ……….$1.51          ……..$1.81
______x4         200,000,000     240,000,000    ……….$1.20          ……..$1.45
____x3.5         175,000,000     210,000,000    ……….$1.05          ……..$1.27

x EBITDA = Multiplier of (Earnings Before Interest Taxes Depreciation
Amortization)
50 EBITDA = Number to be multiplied by projected EBITDA of $50,000,000
60 EBITDA = Number to be multiplied by projected EBITDA of $60,000,000
50 EBITDA Share Price = Price per share at projected EBITDA of
$50,000,000
60 EBITDA Share Price = Price per share at projected EBITDA of
$60,000,000