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

[BargainValueHunter]

I think we're about ready for FTP renaissance. Here's a recent write-up:

 

http://www.stockhouse.com/bullboards/messagedetail.aspx?s=FTP&t=LIST&m=31865005

 

Let the market cap rise to Tembec level and then propose merger ;-)

 

Best part of that great piece on Fortress...

 

Net Value per Share...$29

 

;)

[beerbaron]

Anybody looked at the debentures? 16% yield to maturity with much less risk then the stock.

 

BeerBaron

[Liberty]

http://www.fortresspaper.com/images/pdfs/PR%20.Dec%202012%20Shareholder%20Rights%20Plan.pdf

[lessthaniv]

Not sure if the VIC writer is part of this board or not ... but that was well done.

Thanks.

 

<IV

[shoeless]

Bank of England launches £1bn banknote battle:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9732408/Bank-of-England-launches-1bn-banknote-battle.html

 

..."Interested bidders are believed to include Landqart, the bank note division of Fortress Paper, the Canadian wallpaper and pulp company, and Note Printing Australia, a division of the Reserve Bank of Australia."

[lessthaniv]

That's interesting. If I've read this correctly, the winner would have to take over the existing facility in Debden, Essex. This could perhaps  eliminate some of the currency exchange issues now plaguing the company.

[Liberty]

That's interesting. If I've read this correctly, the winner would have to take over the existing facility in Debden, Essex. This could perhaps  eliminate some of the currency exchange issues now plaguing the company.

 

It also says: "Any bidder must have experience of bank note printing, having printed volumes of at least 500m notes at a single site in a year within the last three years," so I doubt they could take over the actual printing facility.

 

But if they can supply the secure paper, that'd help optimize LQ operations for sure. I wonder what kind of tonnage we're talking about, and if they need one supplier for the whole thing or if it can be split among more than one security paper producer.

[BRK7]

Here's the official tender document:

 

http://ted.europa.eu/udl?uri=TED:NOTICE:371951-2012:TEXT:EN:HTML

 

 

[lessthaniv]

Perhaps we've finally arrived at slack tide?

 

 

http://online.barrons.com/article/SB50001424052748703555704578157450703374428.html?mod=BOL_twm_mw

 

Commodities Corner | SATURDAY, DECEMBER 8, 2012  A Soft Landing for Cotton

By ALEXANDRA WEXLER | MORE ARTICLES BY AUTHOR

 

Prices shrank this year, as production far outpaced demand. But that trend will reverse as farmers plant more and China consumes and consumes.

 

An abundance of cotton has made it one of the worst-performing assets in any class this year, down 20%. Massive global supply paired with weak demand has shrunk prices for the commodity, but that trend is likely to reverse next year.

 

John Payne, a market strategist at Daniels Trading in Chicago, says that cotton prices could double in the next year, despite projections from the U.S. Department of Agriculture that call for a record amount of cotton left over when the current 2012-13 marketing year ends on July 31. While the swollen inventories are "priced in" for cotton futures, Payne says, "what is not priced in is forward production," which is on the decline.

 

That's because farmers are likely to switch to better-priced crops, such as soybeans, according to the International Cotton Advisory Committee. The Washington, D.C.-based intergovernmental body says cotton production will fall 11%, to 23.2 million tons, in the crop year beginning Aug. 1, 2013, on the heels of a 4% decline in the current marketing year.

 

The most actively traded ICE cotton contract for March delivery settled at 73.79 cents a pound Friday, down 20% from a similar date in 2011. In contrast, soybeans for January delivery on the Chicago Board of Trade settled at $14.72 a ¼ bushel Friday, up 23% from a year ago. Cotton is down 0.2% for the week.

 

."There's going to be a lot of rotation out of cotton," Payne says. "You're setting up for a perfect storm if there's an influx in demand." That demand will come from cotton-spinning countries such as Pakistan and Turkey, that buy the raw cotton and spin it into yarn for export. The USDA estimates that Pakistan's 2012-13 cotton imports will rise 140% from a year earlier, while Turkey's 2012-13 cotton imports will rise 47%.

 

The wild card here, as always, is China, which had reduced its purchases of raw cotton. In October, China accounted for 47% of average weekly U.S. cotton export sales of 114,625 500-pound bales. But in November, the cotton behemoth bought just 28% of average weekly U.S. export sales of 333,550 bales. That may seem to point to an increasing demand for raw cotton from markets other than China, but traders and analysts insist that China is still driving cotton demand—countries like Pakistan and Turkey are buying raw cotton, but it's China that is driving the demand for their yarn.

 

The Chinese government controls internal cotton prices, which it artificially inflates to encourage farmers to plant the fiber. In order to circumvent the high domestic prices, Chinese textile mills have turned to importing cotton yarn, for which there is no import quota.

 

In the first week of December, China returned to the U.S. market in force, purchasing more than half of the 415,700 bales sold.

 

"By most rational accounts, [China has] gone beyond where anyone thought they would go," says Andy Ryan, a senior analyst at INTL FCStone in Nashville, referring to China's cotton purchasing over the past year. "Predicting an end to this continuum is going to be difficult."

 

Whether China continues to import or not, falling global production and solid demand from other raw-cotton importers points to higher prices.

 

"I'm not even sure [cotton prices] at 90 cents a pound" will be enough to shift farm acreage back to cotton, said Sharon Johnson, a senior cotton specialist at Knight Futures in Atlanta.

 

 

[Liberty]

Thanks for posting! Nothing cures low prices like low prices, and vice versa. All that is needed is time and a macro environment that is not so bad that billions of people can't afford a few more pieces of clothing anymore, IMO.

[jeffmori7]

So Liberty, it has probably been a though year for you, have you kept all your FTP position with the recent developments? We are now quite mostly just correlated to DP pricing..

 

So far, I haven't reduced mine, but I'm less comfortable with Chad as selling guy..

 

But, even if the price is quite reduced from my average cost, it seems even if I don't sell, I don't want to buy either, partly because of my portfolio exposure to FTP, and partly because I am now in the show me the money mood. What about you guys?

[Liberty]

So Liberty, it has probably been a though year for you, have you kept all your FTP position with the recent developments? We are now quite mostly just correlated to DP pricing..

 

So far, I haven't reduced mine, but I'm less comfortable with Chad as selling guy..

 

But, even if the price is quite reduced from my average cost, it seems even if I don't sell, I don't want to buy either, partly because of my portfolio exposure to FTP, and partly because I am now in the show me the money mood. What about you guys?

 

Hey Jeff,

 

Tough year indeed. Always hard to see something you think was already very cheap get much cheaper on you. I haven't sold a FTP share as I think there are a bunch of important catalysts coming next year and now is probably the worst time to consider selling (meaning probably the best time to consider buying, but I've already got too much so I haven't bought more). I wish they could do buybacks, but not really possible :)

 

I agree with most of what was written in the recent VIC writeup that was posted here, so I won't repeat it to avoid redundancy.

 

If the stock recovers enough in 2013, I'll probably reduce my position a bit because I've decided to be more diversified (to figure out my comfort level I had to do some trial & error, and I think I'm moving towards something that works for me), but I intend to keep a big core FTP position at least until after LSQ is ramped up and then we'll see.

 

update: What's your current thinking on FTP, if I might ask?

[jeffmori7]

Liberty, agree with you. The VIC writeup was pretty well written, maybe a little bit optimist short term. Like you, I'm finding that concentration can be great, but you have to really understand the downside.  As we are young, I think we are in a situation where we are still adding capital to our portfolio so our FTP position will naturally decrease with time (beside increase in the valuation) so it is not critical, but it was for me a good asset allocation lesson. The long term thesis is still valid, but maybe I need to wait for more clarity and/or allocate less to this kind of position.

[lessthaniv]

Analyst (real);

 

New opinion issued - Feb 1, 2012:  Buy $55 Target

New opinion issued - Nov 6, 2012:  Hold $9 Target

 

Feb 1, 2012 implied market cap = $825M (using 15M shares)

Nov 6, 2012 implied market cap = $135M (using 15M shares)

 

In Feb, they were beginning their transition. In Nov, they are approching the end of their transition.

 

Short term hurdles posed. Long term thesis still in tact. Not likely worth $700M in value over the long term.

 

I've bought more.

 

 

[rjstc]

+1    In for a penny. In for a pound. More than doubled position at these prices.

[triedtestedand]

a) Invesco upped their position in November ...  Based on SEDAR, they held 2.410M shares as of July 31st ... and kept that steady (ie no further monthly alternative reports) until November, where they now hold 2.634M shares as of Nov 30th

 

b) Irwin Michael kept his ABC position the same .... Based on Morningstar, at ~800K as of Nov 30th

 

http://quote.morningstar.ca/Quicktakes/owners/MajorShareholders.aspx?t=FTP&region=CAN&culture=en-CA

 

c) Mawer reduced by ~73K shares ... Based on MOorningstar again, to 637K shares as of Nov30th

 

 

d) In semi-related news ... Domtar has indicated it will raise NBSK prices by $30/ton (to ~$900/ton I believe) as of January 1st ... which, irony of ironies, would mean that LSQ would be getting about the same (or more?) from NBSK when it comes onstream if DP prices stay low.  If so, FTP should defer the DP CAPEX ($220M - ~$60M transition + ramp up costs) get a waiver to sell more than the 100K tons they are allowed, and share the spoils w Domtar ... or maybe do what that Chinese firm was pitching for Terrace Bay, and produce semi-dissolving pulp (not sure if/what that requires, and who they could reliably sell it to) for a stretch?

 

http://www.risiinfo.com/pulpandpaper/news/Domtar-slates-Jan-1-30tonne-NBSK-SBSK-pulp-increase-in-North-America.html?source=rssfw

 

 

 

[Myth465]

As have I and I will probably hold my wash purchase, I think I have enough tax losses...

[Liberty]

Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) is pleased to announce the launch of the world's first banknote printed on the Company's new Durasafe® substrate, an innovative paper-polymer-paper composite produced at its Landqart mill.

 

The Moroccan 25 Dirhams: The World's First Durasafe® Banknote

 

With the issuance of the new Moroccan 25 Dirhams scheduled for this month, Bank al Maghrib, Morocco's central bank, will become the first in the world to issue a banknote printed on Durasafe®.

 

The front of the banknote features an Intaglio vignette and a watermark of King Mohammed VI, and a magenta/green colourshift security thread developed by the Company's wholly owned subsidiary, Fortress Optical Features Ltd. ("FOF"). The thread, like the watermark, is embedded inside the banknote yet visible behind a one-sided polymer window. It also has a fully transparent polymer window embossed with the King's royal crest. The back of the note carries a print vignette commemorating 25 years of banknote printing at the Moroccan State Printing Works, Dar As Sikkah.

 

The windows in Durasafe® are formed by die cutting each side of the three layer composite substrate separately. One sided windows (Viewsafe) give a clear view inside the substrate where the FOF thread and the watermark of King Mohammed VI are protected, but fully visible behind the polymer core. The transparent window (Thrusafe) is created by die-cutting both the outer paperlayers to reveal only the transparent polymer core.

 

Chadwick Wasilenkoff, President and Chief Executive Officer of Fortress Paper, commented: "After a decade in development, we are pleased to see the fruits of our labour in the launch of the Moroccan 25 Dirhams. We have designed Durasafe® to offer the ideal characteristics of polymer and traditional paper notes to create a new standard for high security banknote substrates. Fortress Paper would like to congratulate the Bank al Maghrib on the launch of their new 25 Dirham banknote and being the first in the world to produce and launch a Durasafe® banknote."

[triedtestedand]

Now we just need the Swiss to issue their francs with them.  Heck, everyone wants francs these days, and the banks are charging customers to deposit, so should just get holders the physical notes and stuff them under the mattress.

[Liberty]

Any currency with high visibility would be a huge win, as it would increase the chance of other central banks following suit; it's such a conservative industry, I feel like tacit peer approval must matter a lot. Nobody wants to be the first to take a chance in case it's a mistake, but once a few have done it, if it's a good product, it could get some traction.

[alertmeipp]

Any currency with high visibility would be a huge win, as it would increase the chance of other central banks following suit; it's such a conservative industry, I feel like tacit peer approval must matter a lot. Nobody wants to be the first to take a chance in case it's a mistake, but once a few have done it, if it's a good product, it could get some traction.

 

Good news but it's probably marginal. I was thinking hard today where to buy more at this level but the DP pricing still worry me especially with those new capacity coming online. Any update on DP pricing?

[Liberty]

Last I heard about DP prices, they were a bit under 950, but that could have changed since then. I don't think these low prices are sustainable for too long with a significant fraction of the industry losing money, but we'll see.

 

What I'm most looking forward to next is news on the cogen. Once that's up, it'll provide a nice cash stream that isn't dependent on DP prices.

[OptsyEagle]

I wouldn't get too concerned about spot DP prices at this point.  I doubt they are any higher then what we last heard and I suspect they are $50 or so lower.  The economy is still very weak.

 

I have no doubt that FTP stock is currently trading with the expectation that DP prices can continue to go down.  The more important question, with FTP trading at these levels, is "where will DP prices be at the end of 2013" and beyond, since Fortress has enough cash to deal with DP prices, a few hundred dollars lower, for at least the next year and depending on LSQ expenditures, much longer.  Obviously at these prices, they are not going to make a lot of money and that is what is currently dogging this stock, as we speak.

 

Now, there really are only two scenerios going forward.  By the end of 2013, DP prices are a few hundred dollars lower from here and stay there for a while ... or...DP prices are a few hundred dollars higher from here and stay there for a while.

 

In the 1st scenerio, Fortress Paper struggles.  Any profit from Dresden, will surely be eaten up by Thurso.  However, when one tries to determine a floor price for the stock, with Dresden producing about $45M in EBITDA annually, it is most likely going to be somewhere close to where we are, maybe a dollar or two lower depending on how much other bad luck can be added to their endeavours.

 

It's the 2nd scenerio that is more interesting.  Although, it is my opinion, that investors should really be expecting a rise in DP prices over the next 12 months, then a decline.  I have found that Investors, from what I have seen, do not think like this.  They forget the economics of supply and demand, that states that lower prices must reduce supply and increase demand, and instead tend to simply extrapolate the current price trend into infinity.  With this logic, I guess DP will be free to all users, sometime soon. 

 

Anyway, when one looks at the results of both scenerios, on FTP stock, one gets perhaps a small temporary decline in the 1st scenerio, and probably about a 500% increase in the 2nd.  If you can find 10 different stocks, with these same characteristics (20% to 30% downside, 500% upside), you certainly have the basis for serious portfolio outperformance.  All of this, of course, is just my opinion.

[lessthaniv]

http://www.tappi.org/content/events/11diss/floe.pdf

 

page 13.

[lessthaniv]

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=6&cad=rja&ved=0CF0QFjAF&url=http%3A%2F%2Fwww.risiinfo.com%2Fevents%2Fna_conf%2Fpresentations_2012%2FYoung.pdf&ei=qULTUJ-ACaf5igKIjoG4Bw&usg=AFQjCNHk1A8mzFTpcTXzRx4wjeOLmeLSbw&sig2=2epiNonPtaSMfZZM_b-oVg

 

a good summary.