FGE.to - Fortress Paper (formerly FTP.to)

[petec]

Just starting my DD here. Does anyone have an estimate of the free cash flow potential here, and if so could you walk me through how you calculate it? Many thanks.

[Liberty]

I haven't really looked at this in years (one of my early mistakes, learned a lot), but at a glance:

 

12% Gross margins, negative EBITDA, EBIT margins, negative ROIC and ROE, negative FCF, capex consistently higher than depreciation, decreasing cash on the balance sheet, most of book value is in PP&E that isn't worth much if they can't make money from it (the debt is real, though), always at the mercy of commodity price swings, of a plant breaking, labor issues, or unexpected tariffs, etc...

 

Seems like one of those melting ice cubes in a bad industry where you have to work really hard just to stay in the same place. It's volatile and there's operating leverage (which we must remember, cuts both ways), so it could double tomorrow, but time is not on your side, as the past few years have shown.

 

But that's just at a glance, I could be missing something that makes the situation otherwise.

[roundball100]

Perhaps at some point, this thing will go up and someone will look like a genius for having done "proper analysis" and gotten things right. And the reality will be closer to mistaking luck for intelligence.  The record suggests that no one seems to have any idea where this one is going - despite an awful lot of optimism for an awful long time.  Many of those posting on this board seem to have good insights and I don't see obvious false cheerleading by many boardmembers (but it hasn't helped avoid bad luck).  Others seem, in retrospect, to ought to have known better (e.g., the past leader who now seems to be exiting the stage).  Some of it seemed to be very back luck and bad timing, but after a few years of this I began to wonder why both kept happening to the same company/industry.  Maybe things will turn. But if so, I hope people don't start claiming that in retrospect, it was obvious ... if only people had listened to them ...

[triedtestedand]

Giovanni & Ezra are dipping in to buy in December:

 

https://www.canadianinsider.com/node/7?menu_tickersearch=FGE+%7C+Fortress+Global+Enterpris

[sculpin]

Giovanni & Ezra are dipping in to buy in December:

 

https://www.canadianinsider.com/node/7?menu_tickersearch=FGE+%7C+Fortress+Global+Enterpris

 

Good to see. Saw this analysis on Xylitol on Stockhouse. Not my estimates but could be additional value that is definitely not reflected in share price. Any thoughts?

 

Xylitol EPS?

Has anyone made a guesstimate of what the Xylitol production could mean to EPS, given that the pilot plant proves out and a full production plant is built?

 

Lots of unknowns but here's a kick at the can:

 

20,000 tonnes / yr x $US3801/ton / 14.39m shares @ say 30% margin = $1.58 / share EPS.

 

1.58 x an excited market of 15x P/E = $23.70/share

 

Margin is a guesstimate (lowest cost producer)

$/tonne is based on world market / world production...may not be wholesale price.

Google search says spot prices are $US3500 - $4000 /tonne

 

[sculpin]

Dissolving pulp: China terminates its 5-yr import dumping duties on US, Canada, and Brazil

 

OAKLAND, CA, April 19, 2019 (PPI Pulp & Paper Week) -China terminated anti-dumping duties (ADD) on viscose-grade dissolving pulp (DP) imports from the US, Canada, and Brazil that have been in place since 2014, industry contacts toldPPI Pulp & Paper Week.China's Ministry of Commerce (MOFCOM) canceled the duties, effective Apr. 4, according to market participants in China, and the move could be a prelude to an eventual trade deal between it and the USA that reduces or eliminates tariffs on other grades of pulp.

 

 

[GraphadoApp]

Taking a look at this name for the first time so don't have the history that others on here seem to. Maybe this is a fresh look or perhaps a less informed one (What's a Xylitol?).

 

At the current price, the PP&E (liquidation argument) alone provides a pretty solid floor so I can understand the upside argument. However, as a certain stock picker from Nebraska once said "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price". http://www.berkshirehathaway.com/letters/1989.html

 

I guess my question is are you buying because of the price or because of the business? Because I don't see a ton of reason to buy because of the business. I don't see anything in the existing operations that screams under-appreciated powerhouse. As for the Xylitol play, sure it's a nice value opportunity but doesn't the upside require continued operations which have led the company to this difficult position in the first place?

 

Not sure if others know more on management than I do, but turnover in the face of what seems to be a critical transition period from an operational perspective seems like just another hurdle to clear.

 

On price alone, sitting out means you might miss out on some big upside but I prefer to remain disciplined and sit this one out for something with a clearer path to the upside we all seek.

[sculpin]

Taking a look at this name for the first time so don't have the history that others on here seem to. Maybe this is a fresh look or perhaps a less informed one (What's a Xylitol?).

 

At the current price, the PP&E (liquidation argument) alone provides a pretty solid floor so I can understand the upside argument. However, as a certain stock picker from Nebraska once said "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price". http://www.berkshirehathaway.com/letters/1989.html

 

I guess my question is are you buying because of the price or because of the business? Because I don't see a ton of reason to buy because of the business. I don't see anything in the existing operations that screams under-appreciated powerhouse. As for the Xylitol play, sure it's a nice value opportunity but doesn't the upside require continued operations which have led the company to this difficult position in the first place?

 

Not sure if others know more on management than I do, but turnover in the face of what seems to be a critical transition period from an operational perspective seems like just another hurdle to clear.

 

On price alone, sitting out means you might miss out on some big upside but I prefer to remain disciplined and sit this one out for something with a clearer path to the upside we all seek.

 

Depends on your investment style I guess. Some are Berkshire groupies, others momentum traders & yet others (the most successful in the last few years) are cannabis & "losing huge money tech" plays. FGE is a bottom of the barrel commodity play trading at severe discount to book, replacement etc. These have been very out of favour (along with certain other smaller value plays) for years now. Will the reward be worth it? Who knows.

[sculpin]

Too bad Fortress isn't pulping cannabis for THC extracts. Madness in the weed space continues...

 

PI Financial...

 

VALUATION/RECOMMENDATION: We are maintaining our BUY rating (risk: SPECULATIVE) and our 12-month target price of $90.00 (unchanged). Our target is 73x our FY21 EV/EBITDA estimate (unchanged).

All figures in C$ unless otherwise noted.

 

Corporate Information: Canopy Growth Corp. is a world leading diversified cannabis company.

 

Risk: SPECULATIVE

52-week High/Low: $76.68 / $28.76

Shares o/s (fd) ('000): 536,662

Market Cap (fd) ('000): $34,952,769

Average Trading Volume: 2,764,164

Cash ('000): $3,772,970

Debt ('000): $773,049

 

 

[GraphadoApp]

Taking a look at this name for the first time so don't have the history that others on here seem to. Maybe this is a fresh look or perhaps a less informed one (What's a Xylitol?).

 

At the current price, the PP&E (liquidation argument) alone provides a pretty solid floor so I can understand the upside argument. However, as a certain stock picker from Nebraska once said "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price". http://www.berkshirehathaway.com/letters/1989.html

 

I guess my question is are you buying because of the price or because of the business? Because I don't see a ton of reason to buy because of the business. I don't see anything in the existing operations that screams under-appreciated powerhouse. As for the Xylitol play, sure it's a nice value opportunity but doesn't the upside require continued operations which have led the company to this difficult position in the first place?

 

Not sure if others know more on management than I do, but turnover in the face of what seems to be a critical transition period from an operational perspective seems like just another hurdle to clear.

 

On price alone, sitting out means you might miss out on some big upside but I prefer to remain disciplined and sit this one out for something with a clearer path to the upside we all seek.

 

Depends on your investment style I guess. Some are Berkshire groupies, others momentum traders & yet others (the most successful in the last few years) are cannabis & "losing huge money tech" plays. FGE is a bottom of the barrel commodity play trading at severe discount to book, replacement etc. These have been very out of favour (along with certain other smaller value plays) for years now. Will the reward be worth it? Who knows.

 

Without being a Berkshire groupie, I think we can probably agree that "Who knows" probably isn't the investment thesis we want to be going after. I guess I would rather put my money to work in places where I have a more concrete idea of what it is I'm buying into. It's probably less about saying this is a short and more saying what am I passing up to buy in here. As you said. Depends on investment style at the end of the day.

 

[Cardboard]

So what is the purpose of your posting? Ever being told to get lost?

 

Cardboard

[finetrader]

Investing in the common will be  a Homerun or a Zero at this point.

 

Hard to assess the odds for each scenario.

 

But if chances are 50/50, and that Homerun scenario will at least triple you money. Then it probably worth the shot.

 

For the record , I am in. Using The House money I brought in investing in the Debentures. My average price is way higher than today's price though.

 

This is also a play on climate changes. e.i.  severe drought in India or China

 

Everywhere we hear about blue gold (water) scarcity. Cotton production requires a lot of water and there is a strong correlation between Cotton and Viscose Price.

 

 

[bizaro86]

They've announced a plan to investigate a restructuring or strategic options.

[Cigarbutt]

They've announced a plan to investigate a restructuring or strategic options.

I've looked at the debentures this week re: risk and reward.

The decline in dissolving pulp prices has been brutal, enduring and quite unexpected (vs expected demand-supply mismatch). A rebound is possible but who will invest in more capacity in this trade environment where China is the main player?

I come to the conclusion that a simple recap is not enough and, at the very least, new capital is needed at a very high cost.

After coming to a conclusion, I noticed that Mr. W. has been unloading equity and decided to pass.

 

What am I missing going forward?

[bizaro86]

They've announced a plan to investigate a restructuring or strategic options.

I've looked at the debentures this week re: risk and reward.

The decline in dissolving pulp prices has been brutal, enduring and quite unexpected (vs expected demand-supply mismatch). A rebound is possible but who will invest in more capacity in this trade environment where China is the main player?

I come to the conclusion that a simple recap is not enough and, at the very least, new capital is needed at a very high cost.

After coming to a conclusion, I noticed that Mr. W. has been unloading equity and decided to pass.

 

What am I missing going forward?

 

Probably nothing :)

 

The financial position is terrible here. I bought a few debs at $6 as a speculation. The only thing that I think is possible to save them is IQ putting in a bit more money. They already agreed to subordinate and extend their existing financing.

 

Even if they take terribly expensive senior money if they stay afloat and convert the debs I should be able to get more than $0.06 after a conversion by selling shares.

[SharperDingaan]

They've announced a plan to investigate a restructuring or strategic options.

I've looked at the debentures this week re: risk and reward.

The decline in dissolving pulp prices has been brutal, enduring and quite unexpected (vs expected demand-supply mismatch). A rebound is possible but who will invest in more capacity in this trade environment where China is the main player?

I come to the conclusion that a simple recap is not enough and, at the very least, new capital is needed at a very high cost.

After coming to a conclusion, I noticed that Mr. W. has been unloading equity and decided to pass.

 

What am I missing going forward?

 

Probably nothing :)

 

The financial position is terrible here. I bought a few debs at $6 as a speculation. The only thing that I think is possible to save them is IQ putting in a bit more money. They already agreed to subordinate and extend their existing financing.

 

Even if they take terribly expensive senior money if they stay afloat and convert the debs I should be able to get more than $0.06 after a conversion by selling shares.

 

Fortress is going to have to roll this convertible as they don't have the means to pay it off.

They will be negotiating from weakness, and most would expect them to get taken to the cleaners. Hard to see how the bondholders do NOT get a very fat bonus of 'new' convertibles for agreeing to lower the coupon rate; and a new convertible rate that will give them at least 35-40% of the company upon dilution.

 

Ultimately you're hoping to pick these up for <50 cents in the dollar, and a high cash yield, as PMs are forced to sell.

Then an eventual takeout at 125% of PAR by a new buyer for FTP.

But in the interim, a lot of pain.

 

We did very well on FTP the last time this happened .....

But would we do it again? No.

 

If you like high risk, maybe there's a place for you.

But otherwise, a distressed pref is just not worth the angst.

 

SD

 

 

 

[bizaro86]

They've announced a plan to investigate a restructuring or strategic options.

I've looked at the debentures this week re: risk and reward.

The decline in dissolving pulp prices has been brutal, enduring and quite unexpected (vs expected demand-supply mismatch). A rebound is possible but who will invest in more capacity in this trade environment where China is the main player?

I come to the conclusion that a simple recap is not enough and, at the very least, new capital is needed at a very high cost.

After coming to a conclusion, I noticed that Mr. W. has been unloading equity and decided to pass.

 

What am I missing going forward?

 

Probably nothing :)

 

The financial position is terrible here. I bought a few debs at $6 as a speculation. The only thing that I think is possible to save them is IQ putting in a bit more money. They already agreed to subordinate and extend their existing financing.

 

Even if they take terribly expensive senior money if they stay afloat and convert the debs I should be able to get more than $0.06 after a conversion by selling shares.

 

Fortress is going to have to roll this convertible as they don't have the means to pay it off.

They will be negotiating from weakness, and most would expect them to get taken to the cleaners. Hard to see how the bondholders do NOT get a very fat bonus of 'new' convertibles for agreeing to lower the coupon rate; and a new convertible rate that will give them at least 35-40% of the company upon dilution.

 

Ultimately you're hoping to pick these up for <50 cents in the dollar, and a high cash yield, as PMs are forced to sell.

Then an eventual takeout at 125% of PAR by a new buyer for FTP.

But in the interim, a lot of pain.

 

We did very well on FTP the last time this happened .....

But would we do it again? No.

 

If you like high risk, maybe there's a place for you.

But otherwise, a distressed pref is just not worth the angst.

 

SD

 

I think you've missed some of the action here. They already did roll them, so the expiry is a long way out now. But their position is now so poor I doubt they will continue paying the interest. These are trading at 6 cents on the dollar, well below $0.50...

 

I bought a few here, and the case I'm hoping for is that they convert them to equity at the market price (as the indenture permits) and I can sell the equity for ~20% of face value.

[sculpin]

Current EV for FGE is ...

 

IQ loan $118mm

IAM loan $35mm

Converts $62 @ $0.07 = $4.3mm

Equity 15mm @ $0.14 = $2.1mm

 

Total EV = $160mm

 

Production capability is 190,000 tonnes

 

EV/production = $842/tonne

 

Sappi is increasing its capacity in South Africa at a cost of $2,940 tonne.

Lenzing is thinking of building a new DP mill in Brazil at a cost of $2,889/tonne. FID by end of 2019.

 

Would it be worth either of these 2 or any other strategic/private equity to offer $1,200/tonne for FGE. Less than half the cost of new build or expansion.  They would also get the assets of the Advanced Bio Products. All depends on how long one assumes DP will be depressed, current mill reliability and whether the current Board of Directors and the their new advisors are relatively competent in resolving this crisis.

 

At a $1,200/tonne valuation there would be left $75mm roughly for CVD's & equity or 100% on the FGE.DB and maybe $0.80 for the common.

[sculpin]

FGE bioenergy

 

Potential value in the FGE cogen bioenergy plant could be much greater than the $35mm IAM loan secured against it.

 

Have an old FTP powerpoint from 2015 describing it as being worth $120mm. Also have some correspondence with a director few years ago that said...

 

Their deal with Hydo Quebec is not only very good but I learned is is not replicatable which makes a conversion very very attractive to a party that has cash and/or downstream viscose assets.

 

24 Megawatt cogeneration power facility: they buy industrial power and sell back to the grid for 3x the price.

 

Could be a good test of its value as Raymond James has a valuation of Conifex's cogen bioenergy plant at 8 times ebitda for a value of $112mm on a recent research report & CFF is in the process of selling its BC assets. I would think FGE's could be worth more as Qc doesn't have same current shortage of biomass aval as BC right now. However would need to know the details of the PPA with Hydro Quebec. FGE bio energy did about $21 mm in revenue recently.

 

Could be a good asset to sell to the likes of Boralex or Innergex. Right now the asset has a debt on it of about $35mm with IAM but could be substantial value above this on a standalone sale assuming this is allowed or practical? Or does this energy plant make the entire mill more attractive to a Sappi, Lenzing, etc???

 

Rayonier just sold their Matane pulp mill to Sappi for $175 million US...

 

https://www.pulpandpapercanada.com/rayonier-to-sell-matane-que-pulp-mill-to-sappi-1100001826/

 

[SharperDingaan]

What a shit show these days...

 

We wish you luck, but the smartest thing right now would be to just shut it down and liquidate. At the current loss rate, they will BK by year-end at the latest - maybe even earlier. While there might be buyers for some of the assets; any offers are going to be at well below market price, and its a buyers market. Hard to see how the coming losses and write-downs come in at less than the current 86M of combined equity (21) and debenture (65) capital.

 

SD

[alertmeipp]

Anyone see values in common or the convertible bond?

or it's a wipe out?

Chad is selling out so I assume no way common will have any value?

[SharperDingaan]

At best, they've been burning 2.5M of cash every 21 days, & why they have shut down. They have enough cash left to maintain the assets while they are on the block, but it's an 'orderly' liquidation. To make a $ now is to trade it, not invest in it.

 

SD

 

 

[Liberty]

At best, they've been burning 2.5M of cash every 21 days, & why they have shut down. They have enough cash left to maintain the assets while they are on the block, but it's an 'orderly' liquidation. To make a $ now is to trade it, not invest in it.

 

SD

 

Well, the market cap is now $220k CAD, so you can probably buy it whole and run it how you think it should run.

 

 

[Liberty]

Look what I found in the archives:

 

[alertmeipp]

Hero to Zero in 10 years.