Shane Posted February 21, 2011 Share Posted February 21, 2011 First Investment Idea, could be an interesting play. Was wondering if someone else had noticed this company. Valueline: BUSINESS: P. H. Glatfelter Company is one of the world’s leading manufacturers of specialty papers and engineered products. It has paper mills in Pennsylvania, Ohio, Germany, the U.K., and France, as well as an abaca pulp mill in the Philippines. It serves the book publishing, carbonless & forms, envelope & converting, engineered products, food & beverage, and composite laminates markets. Has 3,546 employees. Third Avenue Management owns 6.4% of com- mon stock; Dimensional Fund, 8.1%; Vanguard Group, 6.4%; BlackRock, 5.3%; officers & directors, 2.9% (3/10 proxy). Chairman and CEO: George H. Glatfelter II. Incorporated: Pennsylvania. Ad- dress: 96 South George Street, Suite 500, York, PA 17401. Tele- phone: 717-225-4711. Internet: www.glatfelter.com. FCFY ~ 25% according to Yahoo Finance CF has been relatively steady throughout recession, has been growing Priced around Book Value Earnings are coming back and macro-economic view might be very attractive Has not raised dividend in 6 years, but has a 3% yield. Abnormally high for this company. What do you all think? Link to comment Share on other sites More sharing options...
Myth465 Posted February 21, 2011 Share Posted February 21, 2011 Numbers seem all over the place. Not sure what normalized earnings are. They went from $55 million in cash flow with all of it going to capex to $160 million in cash flow. Why the swing, why moving up, and why is stock price staying the same? Link to comment Share on other sites More sharing options...
WideMoat Posted February 21, 2011 Share Posted February 21, 2011 Kicked the tires on this a bit. Let's take Morningstar's net income numbers (and ignore special items, which in this case, are material): 39m for 2005, (12m) for 2006, 63m for 2007, 58m for 2008, 123m for 2009, and 54m for 2010. Call it 325m over 6 years, or 54m per year. Capex has run below DA for the last 6 years, so annual owners earnings may be a bit higher than that 54m figure. Management projects capex to run 60-65m in 2011, and looking historically, I see years in the 90's where capex greatly exceeded DA, in years where they upgraded equipment. They did make an acquisition in 2010, so owners earnings may trend a bit higher in upcoming years. They carry net debt of 200m at 12/31/10. If I assume that I can carry 200m in debt on these assets in perpetuity, I'm paying 10x owners earnings at these prices (540m market cap on 11.8 p.s.). Attractive enough to dig deeper? Link to comment Share on other sites More sharing options...
Myth465 Posted February 21, 2011 Share Posted February 21, 2011 Not for a paper company. Save yourself the time and buy FBK at 2x earnings into a strong Pulp market. Thats my 2 cents, and I just added a bit to my FBK at $1.55 Link to comment Share on other sites More sharing options...
Shane Posted February 21, 2011 Author Share Posted February 21, 2011 Thanks for input guys, As I said new to screening for stocks. Anyone care to comment on the franchise value of this company? Pulp would be a commodity, correct? Would this company have franchise value because it sells more specialized products? I am now reading Bruce Greenwald's book on analysis and am trying to work through some of his idea's. Link to comment Share on other sites More sharing options...
Myth465 Posted February 21, 2011 Share Posted February 21, 2011 I dont know about the franchise value but it seems like capex is pretty high in relation to cash flow. Not much left over. Also dont see a big moat here given the industry. Given that its hard to get excited about 10x cash flow. I really dont do much work unless its cheap. I think FBK is worth at least 5x CF and probably closer to 7x or 8x with no debt. Its trading at 2x. This one is at 10x, I kind of stop thinking about it at that point. If its not cheap and doesnt have a wide moat in a great industry then why bother... I dont think alot of companies are worth above 10x earnings, the key factor is do they have pricing power and how much are they a slave to the economy. Growth would be another key factor. Link to comment Share on other sites More sharing options...
finetrader Posted February 21, 2011 Share Posted February 21, 2011 Myth465, I agree FBK is cheap but it is not trading at 2X earnings MKT Cap is 200M, no way earnings are at 100M. I see CF at around 60M right now and FCF at 45M. Link to comment Share on other sites More sharing options...
Myth465 Posted February 21, 2011 Share Posted February 21, 2011 Myth465, I agree FBK is cheap but it is not trading at 2X earnings MKT Cap is 200M, no way earnings are at 100M. I see CF at around 60M right now and FCF at 45M. You are correct, I am thinking about FBK at about $1 with some minor cash flow adjustments for less debt, higher pulp, and a few other things. Amazing its up 55% and we all still consider it a dog. Interesting world. I also should have said CF and not earnings. Link to comment Share on other sites More sharing options...
alertmeipp Posted February 21, 2011 Share Posted February 21, 2011 FBK: by mid next year, it will be 2x if things remain constant. It's madness. Link to comment Share on other sites More sharing options...
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