CFX.UN - Canfor

[tnp20]

http://www.investorvillage.com/smbd.asp?mb=6468&mn=14949&pt=msg&mid=9843195

 

Might be a short term buying opportunity now and perhaps even in Jan when US shares are liquidated.

 

This is purely short term play, as I have no idea how Canfor and Pulp prices will do in the future.

 

This is for my Candian cousins, thanks to us US cousins.

[ValueSlant]

Canfor is starting to look interesting with the recent decline in pulp prices. I did some analysis of it here:

http://valueslant.com/2011/12/14/mercer-international-merc-opportunities-market-pulp/

And some on NBSK markets more generally

http://valueslant.com/2011/12/06/nbsk-pulp-market-overview/

What do you think about CFX vs. MERC?

 

ValueSlant

[Uccmal]

Well, Canfor Pulp is in my greatest hits list.  I first owned it in spring 2009.  They shortly after resumed the dividend.  I had nearly sold out in the high teens in the spring and have since reloaded at new lower prices - in the 11-12 range. 

 

The stock is reflecting a likely dividend reduction on lower pulp prices.

 

No debt, pays a dividend, stable management, overseen by Jim Pattison, and Canfor.  Power coming on stream at each plant.  I think it is even below book right now.  Last Q the payout ratio exceeded 100% on a Cash flow basis, which they wont sustain for long at these commodiy prices. 

 

Merc - I like as well.  Unfortunately it will be sometime before Merc delivers a dividend, and I insist on a dividend or a nuts low price, for commodity companies.  Merc may well be

getting to a nuts low price.  Certainly well managed as well.  Interest is paid by power production.  High debt but entirely manageable.  Somewhat leveraged to Euro economy. 

 

Fwiw, there is probably no hurry on any P&p stocks.  Take your time and get to know them.  Cibc put

a 14$ price target on cfx today.  I dont know their justification.  It seems overly optimistic.

[alertmeipp]

I think they will cut, but the current pps more than reflected it I think.

Last Q they out spent partly because of higher cap ex than forecast, no?

[ValueSlant]

I think they will cut, but the current pps more than reflected it I think.

Last Q they out spent partly because of higher cap ex than forecast, no?

 

They guided to higher capex for the year, will see the big uptick in Q4. Q3 cash flow was weaker than expected due to the longer than anticipated downtime at Northwood and decline in pulp pricing. They are going to be very tight on the .40 cent dividend especially with increased capex in Q4 probably using up most of their excess cash. Although the strength of the USD has helped offset a lot of the pulp price declines recently.

 

ValueSlant

valueslant.com

[Uccmal]

Hi valueslant, I didn't realize your links were to your own analysis before I commented.

 

You did a nice analysis.  I doubt Canfor would eliminate their dividend.  I expect something in the range of .30/q at the low end.

 

To some degree low pulp prices become self correcting.  We get a pretty good idea what a new or refurbished mill would cost by the cost of Mercs new mill.  Its a lot, with a lengthy lead time, and an even longer payback time. 

 

I like that neither Merc nor CFX have invested in dissolving pulp for viscose as well. 

[FFHWatcher]

 

I like that neither Merc nor CFX have invested in dissolving pulp for viscose as well.

 

Fortress shareholders appreciate that fact as well.

[ValueSlant]

Hi valueslant, I didn't realize your links were to your own analysis before I commented.

 

You did a nice analysis.  I doubt Canfor would eliminate their dividend.  I expect something in the range of .30/q at the low end.

 

To some degree low pulp prices become self correcting.  We get a pretty good idea what a new or refurbished mill would cost by the cost of Mercs new mill.  Its a lot, with a lengthy lead time, and an even longer payback time. 

 

I like that neither Merc nor CFX have invested in dissolving pulp for viscose as well.

 

Thanks. Yeah I certainly don't think Canfor will eliminate the dividend entirely. At current NBSK prices there is a chance they can sneak by and maintain the .40 but I would guess they take it back to .30 or .35. The dividend could fall much farther than that if NBSK keeps tanking, although clearly some dividend reduction is already priced in to the stock.

 

That is a good point about self correcting- I do think the longer term supply/demand fundamentals for NBSK are solid.

 

ValueSlant

valueslant.com

[Alekbaylee]

I know a lot of us got burned in the Fibrek saga, but anyone has looked at Canfor?

It took a dive when management suspended the div. last fall (they had some one-time extra costs) but looks OK for longer term. They're one of the best in their segment. Could be a good entry point. I'm thinking of tipping my toe...

[Uccmal]

I still hold a relatively small position.  I sold some since last year and then bought some back at the new low price.  I might consider going in bigger, if my attention and capital weren't elsewhere. 

 

I am concerned that if the price stays low Canfor may take it private.  The reason for running it as a separate entity was to have it as an income trust - now that that is long gone there is little reason to continue this way.  They are combining the comference call with parentco. 

 

Pulp prices are on a slow upswing again, for now. 

 

BTW - there is no resmblance here to the disaster at fbk/sfk. 

[Alekbaylee]

I am concerned that if the price stays low Canfor may take it private.  The reason for running it as a separate entity was to have it as an income trust - now that that is long gone there is little reason to continue this way.

- Thx for pointing this out - wasn't aware of that risk.

 

BTW - there is no resmblance here to the disaster at fbk/sfk.

- I know - just the same commodity. Canfor is known for its ability to execute and adjust to the market/demand/price quite rapidly. That's what I like.

[Guest Quebec]

I am concerned that if the price stays low Canfor may take it private.  The reason for running it as a separate entity was to have it as an income trust - now that that is long gone there is little reason to continue this way.  They are combining the comference call with parentco.

 

I share this concern...  It looks choreographed to happen (at a low price). Ceo replaced, mgmt merged, divi dropped, quiet profile, low stock price... It's a good biz, why wouldn't Canfor want all of it instead of 50% ?

 

I own a little but this realisation stops me from adding.

[SharperDingaan]

We think we will pretty much have the answer this week. If there is no dividend, the odds on a take-out go up by a good 1/3 to 1/2, as it would suggest that they are holding the cash back to fund the premium on a potential future bid.

 

We hold a stub stake in CFX (left over from the SFK/RFP exit). Not added, as we think they need to make a decision, and we see far better opportunities elsewhere.

 

SD