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

[SharperDingaan]

You might want to ask yourself why this thing should not drop at least another 20-25% before Q1 2014 results are announced.

 

Those cracked pipes (reported Dec-05) mean that they will not be covering all their fixed costs for at least 1-2 months. In the current market, it also means that the mill may well end up being temporarily mothballed for an extended period while everything is being fixed under insurance reimbursement.

 

Add to it that there is very strong incentive to temporarily pull the plant (insurance covering part of the lost margin), & add the ability to switch to other products (NBSK pulp) while it is down. More delay, & more capital cost, on top of a debenture that comes due in just over 2 years.

 

And we are also into year-end, & another very strong incentive to hedge; take the tax loss & use the cash proceeds & tax recovery loss to buy back in later after the 6 month wash restriction is over. By which time you will know where the market is settling, how much repair cost was covered by insurance, & whether the plant is mothballed or not.

 

So to invert; ... if you want a new value investor, today, to take on all this significant & substantial risk - can you reasonably explain why that investor is NOT going to want a 20-25% discount, to get paid for the risk? If you cannot ... it is a very good indication as to where the share price is likely to go.

 

SD

 

[Liberty]

Isn't the wash restriction 30 days?

[SharperDingaan]

Minimum 60 days in Canada

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/lss-ddct/sprfcl/menu-eng.html

 

SD

[alertmeipp]

Why 25 percent but not 15 or 55? Just a number from air? Everyone want cheaper and buy in bottom but only a few will.

[phil_Buffett]

Why 25 percent but not 15 or 55? Just a number from air? Everyone want cheaper and buy in bottom but only a few will.

 

it is very difficult to say what happens. maybe we have already the bottom? in my opinion the stock already reflects a lot of Panic and fear.

[OptsyEagle]

How many times does this stock have to give an investor a 25% discount.  It has already made this offer about 10 times in the last 2 years.  Do you really think another 25% makes all that much difference?

[alertmeipp]

I think is 30 days in Canada not 60.

[alertmeipp]

How many times does this stock have to give an investor a 25% discount.  It has already made this offer about 10 times in the last 2 years.  Do you really think another 25% makes all that much difference?

 

Many of us know predicting short term pricing makes one look dumb from time to time

[Ian L]

I made it through the whole thread and have been following it for a few months. I agree it is a cheap company, though with too many operational problems. Things just keep going wrong.

If it keeps on like this, by the time some good news comes in, we might be able to buy in at similar prices to today. I am just going to wait and keep an eye out for good news about the DP price and the company, and then buy if the price is still low. Sure, I will miss the absolute low, but I will run less risk of losing the whole investment than if I just bought now.

[SharperDingaan]

If you want to do a hedge, or tax loss wash trade, you have to find a buyer by Dec-31 - & no buyer, no benefits.

 

Equity buyers have little reason to put up their liquidity, & the more of it you want - the more of a liquidity discount they are going to demand. They will also be very aware of institutional restrictions on the minimum price for a debenture, & some of these debs are getting uncomfortably close. If you think there may be a rush for the exit, you put up the exit (liquidity discount) toll.

 

The actual liquidity discount will be purely a function of supply/demand at the time, & hence impossible to predict. But try putting a bigger block of equity out for bid, right after a negative press release, & see what happens. And if 2 in every 3 press releases (positive, negative, indifferent) are not positive for the next few months, it cannot be good.

 

The 'Your first loss is your smallest loss' maxim exists for very good reason.

 

SD

 

[txitxo]

You might want to ask yourself why this thing should not drop at least another 20-25% before Q1 2014 results are announced.

 

Those cracked pipes (reported Dec-05) mean that they will not be covering all their fixed costs for at least 1-2 months. In the current market, it also means that the mill may well end up being temporarily mothballed for an extended period while everything is being fixed under insurance reimbursement.

 

Add to it that there is very strong incentive to temporarily pull the plant (insurance covering part of the lost margin), & add the ability to switch to other products (NBSK pulp) while it is down. More delay, & more capital cost, on top of a debenture that comes due in just over 2 years.

 

And we are also into year-end, & another very strong incentive to hedge; take the tax loss & use the cash proceeds & tax recovery loss to buy back in later after the 6 month wash restriction is over. By which time you will know where the market is settling, how much repair cost was covered by insurance, & whether the plant is mothballed or not.

 

So to invert; ... if you want a new value investor, today, to take on all this significant & substantial risk - can you reasonably explain why that investor is NOT going to want a 20-25% discount, to get paid for the risk? If you cannot ... it is a very good indication as to where the share price is likely to go.

 

SD

 

Well, it has gone down by 30% in the last 3 weeks. It seems those cracked pipes have been leaking for some time.

[alertmeipp]

If you want to do a hedge, or tax loss wash trade, you have to find a buyer by Dec-31 - & no buyer, no benefits.

 

Equity buyers have little reason to put up their liquidity, & the more of it you want - the more of a liquidity discount they are going to demand. They will also be very aware of institutional restrictions on the minimum price for a debenture, & some of these debs are getting uncomfortably close. If you think there may be a rush for the exit, you put up the exit (liquidity discount) toll.

 

The actual liquidity discount will be purely a function of supply/demand at the time, & hence impossible to predict. But try putting a bigger block of equity out for bid, right after a negative press release, & see what happens. And if 2 in every 3 press releases (positive, negative, indifferent) are not positive for the next few months, it cannot be good.

 

The 'Your first loss is your smallest loss' maxim exists for very good reason.

 

SD

 

Talk to those who didn't pull the trigger or sold out when BAC was trading at single digit :)

 

 

[alertmeipp]

I made it through the whole thread and have been following it for a few months. I agree it is a cheap company, though with too many operational problems. Things just keep going wrong.

If it keeps on like this, by the time some good news comes in, we might be able to buy in at similar prices to today. I am just going to wait and keep an eye out for good news about the DP price and the company, and then buy if the price is still low. Sure, I will miss the absolute low, but I will run less risk of losing the whole investment than if I just bought now.

 

What kind of DP price does the current pps reflect?

When this is trading at 40 bucks, a 20% move is 100 million market cap move, fairly significant amount. But at 3.75, at 20% is merely 10 million move... the common is pricing like DP price option, it can trade up/down 40-50% next month and it is still JUST a 30millions move. A 10%-20% move in DP price generate about that much EBITDA annually. I wish I had waited looking back but you never know.

[alertmeipp]

You might want to ask yourself why this thing should not drop at least another 20-25% before Q1 2014 results are announced.

 

Those cracked pipes (reported Dec-05) mean that they will not be covering all their fixed costs for at least 1-2 months. In the current market, it also means that the mill may well end up being temporarily mothballed for an extended period while everything is being fixed under insurance reimbursement.

 

Add to it that there is very strong incentive to temporarily pull the plant (insurance covering part of the lost margin), & add the ability to switch to other products (NBSK pulp) while it is down. More delay, & more capital cost, on top of a debenture that comes due in just over 2 years.

 

And we are also into year-end, & another very strong incentive to hedge; take the tax loss & use the cash proceeds & tax recovery loss to buy back in later after the 6 month wash restriction is over. By which time you will know where the market is settling, how much repair cost was covered by insurance, & whether the plant is mothballed or not.

 

So to invert; ... if you want a new value investor, today, to take on all this significant & substantial risk - can you reasonably explain why that investor is NOT going to want a 20-25% discount, to get paid for the risk? If you cannot ... it is a very good indication as to where the share price is likely to go.

 

SD

 

Well, it has gone down by 30% in the last 3 weeks. It seems those cracked pipes have been leaking for some time.

 

the cracked pipe and 1-2 weeks loss of operation time is not significant at all. It's the "oh, another -ve news" that pissed ppl (me included) off.

 

Having said all I said, I wouldn't allocate too much into this idea. It's one of those that if it works, it will multiply your money, if not, a zero in 2-3 years. I like the risk and reward ratio, but a zero is a zero.

[alertmeipp]

Minimum 60 days in Canada

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/lss-ddct/sprfcl/menu-eng.html

 

SD

 

Your reference link says 30 days??

[SharperDingaan]

Yes... sorry it should be 30 days for wash trades

 

Also agree re the company. These short-term changes don't really reflect the 'value' of the company, but strictly the liquidity supply/demand for the shares. If you need the cash & this is all you have, you have to accept what you are bid - not what you would like.

 

SD

[plato1976]

no offense - first, my knowledge on FTP is superficial

but it puzzled me a lot why so many are/were fascinated by this crappy business. Only b/c maybe FFH and/or Chou were/are in this ? The equity seems hard to value now. It's all about surviving , b/c compared with the debt the size of the equity part will soon be ignorable ?

 

I am also not sure if the pay structure of the CEO is aligned with the corp, or at least with the survival of the corp.

 

If this corp does survive, the upside can be huge. but come on, there are many highly leveraged corps elsewhere, why FTP specifically ? I just don't see its turnaround has a predictable timing.

 

Yes... sorry it should be 30 days for wash trades

 

Also agree re the company. These short-term changes don't really reflect the 'value' of the company, but strictly the liquidity supply/demand for the shares. If you need the cash & this is all you have, you have to accept what you are bid - not what you would like.

 

SD

[txitxo]

Having said all I said, I wouldn't allocate too much into this idea. It's one of those that if it works, it will multiply your money, if not, a zero in 2-3 years. I like the risk and reward ratio, but a zero is a zero.

 

I would never buy this in a concentrated portfolio. But it is a great stock for a probabilistic, basket-like portfolio. 

[augustabound]

no offense - first, my knowledge on FTP is superficial

but it puzzled me a lot why so many are/were fascinated by this crappy business......

 

I've just re-read the entire thread the last couple of weeks. 

I followed FTP until about a year ago. For the most part I lost interest but I also can't invest if there's isn't cash flow, so it went in the too hard pile for me.

The majority of the thesis went towards Chad and his capital allocation skills.  He bought for next to nothing, had/has government incentives on good terms and was entering markets where he had higher margins, customer captivity etc. 

They were getting out of the crappy business and into more profitable lines.

 

 

I am also not sure if the pay structure of the CEO is aligned with the corp, or at least with the survival of the corp.

 

I think Liberty mentioned early in the thread that Chad is basically blacked out from buying shares in the open market since he's not an operating CEO, he's the deal maker.  Conceivably he always has insider knowledge because he's almost always looking for the right deals.

The total comp has been high, I'm not defending him, just giving their reason for options/bonus grants.

[obtuse_investor]

Having said all I said, I wouldn't allocate too much into this idea. It's one of those that if it works, it will multiply your money, if not, a zero in 2-3 years. I like the risk and reward ratio, but a zero is a zero.

 

I would never buy this in a concentrated portfolio. But it is a great stock for a probabilistic, basket-like portfolio.

 

That is exactly the approach I have taken. FTP is more like a call option, >200% upside and limited downside.

 

This is why this represents a very small, but meaningful, part of my portfolio.

[triedtestedand]

Lost in the hubbub of the incident at Thurso (don't get me started) ...

 

A) Surprise, surprise, surprise ... a new leaderboard of the top 5 owners (excluding Chad) as of Nov. 30th:

 

http://investors.morningstar.com/ownership/shareholders-major.html?region=CAN&t=FTP

 

Invesco Canada Ltd.                                     2,581,766 17.73 66,700         2.65 0 06/30/2013

Franklin Templeton Investments Corp     1,559,000 10.71 1,559,000 New         0 11/29/2013

AGF Investments                                     417,677 2.88         -42,034         -9.14 0.43 11/30/2013

I.A. Michael Investment Counsel Ltd.             800,000 5.49         0                 0         1.72 11/30/2013

Ramius, LLC                                             384,898 2.64         -24,800         -6.05 0.49 09/30/2013

 

-> Franklin Templeton just reported (their previously undisclosed) interest, crossing the 10% threshold in November. 

-> Note the alternative monthly report on SEDAR

            http://sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00025348

 

Considering that less than this volume traded hands during the month ... they've obviously been accumulating for awhile, and not having to report until now reaching the 10% ownership level.  Wonder if they were buyers this past week as well -> as an aggregate of ~1M shares changed hands (much of that sold via Raymond James).

 

Unless we see an alternative monthly report change by Invesco in the next few days (I think they have to report by the 10th), and/or they or Irwin Michael sold this first week of December, then four players now control over 50% of the shares (Chad @ ~2.5M; Invesco @ ~2.6M; Franklin @ ~1.6M; Irwin Michael @ .8M).

 

B) China Imported DP price now at $900 (vs avg of ~$865 in Q3) ... check out the graph at following site:

              http://www.ccfei.net/product/prod.aspx?sid=Z05&pid=P19  (DP pricing)

              http://www.ccfei.net/product/prod.aspx?sid=Z05&pid=P20  (VSF pricing)

 

C) Canadian dollar now at $.94 vs USD (down from $.97 at end of Q3)

 

-> Theoretical effect of B and C, and 13% interim duty ... everything else being equal

        -> Q3 = $891 CDN {$865 USD / .97}

        -> Now = $833 CDN {($900 / .94)  x .87}

 

If Chad could actually get his customers to pay half the duty - would need to see to believe - then given bump in DP prices, and dip in CDN dollar, they'd be neutral vs Q3.

 

 

 

 

 

 

 

 

 

 

 

[alertmeipp]

I have read that the offering price is 930 to 950 recently. And cogen SHOULD be marching on better. I think the 30 percent nbhk will be more profitable then dp? And q3 had abnormal high expense.

 

Interesting news on new fund ownership.

 

 

[OptsyEagle]

 

If Chad could actually get his customers to pay half the duty - would need to see to believe - then given bump in DP prices, and dip in CDN dollar, they'd be neutral vs Q3.

 

I don't think any negotiation will be required.  The customers will and will not be paying the duty.  I doubt they will agree to hand over a certain percentage or to pay some percentage higher then market price, due to this duty.  What they will do is pay a higher market price for their dissolving pulp, because of this duty.  It all works out to be the same thing.  Unfortuneately, that concession has already happened.

 

As you see from your graph, these customers are already paying about 5% to 6% more, then before the duty was applied.  That spike was not a coincidence.

[lessthaniv]

Its been a short term storm. Falling cotton prices accompanied by the building of excess cotton stocks during a time where DP supply side also expanded rapidly. The tariff should mitigate the supply side issues over time. The cotton stocks appear to be of low quality and many buyers are paying premiums and buying on the open market. And the demand side for DP continues to look strong.

 

http://i728.photobucket.com/albums/ww289/MikeNCathy/demand_zps1efc35a6.png

 

 

[Liberty]

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Dec. 9, 2013) - Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) announced today that three of the four digesters at the Fortress Specialty Mill (the "FSC Mill") in Thurso, Quebec resumed operation today after being shut down since December 5, 2013 to complete required and preventative repairs to piping. Accordingly, the FSC Mill has resumed production and is ramping up operation of the cogeneration facility. The Company anticipates the fourth digester will be operational on December 11, 2013.

 

Yvon Pelletier, President of Fortress Specialty Cellulose Inc., commented: "While this operational technical setback was beyond our control and unfortunate, I am very proud of our team who were able to expeditiously rectify the issue. As a result of their diligent efforts, we have resumed production at the FSC Mill with limited downtime."

 

What?! Did something go better than expected?!