Ainsworth Lumber Co Ltd ANSBF

Upgrade looming?

[dosperros]

Hi all,

 

I just read a report by Daryl Swetlishoff on IFP.A.  This is the fellow who popularized the concept of the lumber super-cycle.  He's a very bright guy.  And what's good for lumber is generally good for OSB. 

 

Anyway, DS hiked the PT on IFP.A considerably.  This was driven by increasing the EV/EBITDA multiple considerably.

 

EV/EBITDA
2012A: 12.8x        2013E:5.7x      2014E:4.2x

 

RBC is behind somewhat, but they use a different technique.  They have ANS at a  $5.00 valuation.  They use the following Ms.  If RBC were to increase the multiple or the 2013 PT they would get an estimate north of $5.  Or just adjust the Q2 NC OSB price of $380.  They also have $380 for Q3.  Like the internet meme says, 'ain't nobody got time for that.'  Doing this could easily find another $30M or so of earnings (projected) in 2013 the multiples would hike the PT to about $6.00 for instance (based in a back of the napkin sketch.)  Regardless, RBC and Mr. Quinn do great work and probably are not in the business of doing stuff like this until they know for sure.  Yet, going into Q2 we will soon  know.

 

RBC's multiples:

10.2x    4.7x     5.3x

 

Anyway, we may see some action on the estimate.  Mr. Swetlishoff may be at the forefront as he seems to be not shy about looking to get his investors into the sector while there is still a strong return to be made.  It might not come until the price his maybe $4.50 or so.  It's a bit of caution on the part of the guy making the call.

 

 

Why be cautions?  Ughh.  This, below, is not optimistic.  They don't even have a HR Manager in place yet.  There are two choices in a case like this: spend ones way out of the dilemma or just wing it.  I hope they are not winging it.  You need good technical staff for a place like this, so hopefully they get some people in soon.   I had a guy who knows a guy who knows a guy..... who took a sr. mgmt job within the past X years and left after a short period (between X and X months) due to the fact that it was a "bad" place to work and the pay lagged the 70 hour weeks considerably.  I'd probably want upwards of a $50k signing bonus to for even a mid-manager role at a small northern town like this; I hope for the sake of my ANS shares these guys are not being overly frugal.  Start-ups are a gong show; the union guys pull a lot of OT but the mgmt team needs a huge signing bonus to make it worth their while.

 

https://www.ainsworthengineered.com/contacts/careers/

 

/DP

[estebancaballo]

Interesting analysis 2 woofs, I am a bit suprised by your comments about the High Level reopening activities....perhaps they don't have an HR manager there yet - but they do have an existing HR staff so it doesn't seem to be a big deal to me....I don'r really get your concern in this dept....I was a bit disappointed initially to find out that they won't open HL till later in the

[dosperros]

Looking at the vacant job postings in HL is tough.  They are competing in wages with the patch.  I doubt that they are (1) matching wages or (2) offering fly-in, fly-out.  People are key to restarting this thing.  Maybe I'll be surprised, but we will see.   IFP.A is strong and I would invest in it over WFT or CFP at this time personally.  The timber guys have less

[Azorean]

This post has been removed in accordance with Community Policy

[estebancaballo]

Thanks very much D, I agree and plan to increase my ANS position and also take on a bit of IFP.A for the longer term........

[mapmaker]

i just dont get why the lumber companies have such high p/e ratios. WFT is the lowest at ~44. CFP is at 96 and ifp had negative earing last Q so theirs is even higher. I know P/E isn't that important but its one of the first things i look at and under 20 for P/E is a good sign. ANS is at 14 and NBD is at 22. anyone?

[pappy7]

A low p/e can also mean a company that is in trouble financially. Not saying this is the case with ans, but that is one thing a low p/e can signal.

[PAGODA5]

And an outrageously high P/E is an indication the company is overvalued and very risky at those particular levels.  I think the lumber companies are ff the charts becuase the herd has run over and bought them given the state of the US housing market.  You can make good money on these momentum swings you just need to know when to get out.  Make your $ and bail and don't second

[louel]

The other side of a high P/E is foward expected growth to match.   Earnings from sales are projected to drop for the next two to four years.   Institutional ownership is what has been driving price.  I think I'll tag along for the ride.  As long as the housing market continues to grow we'll do just fine.

[fibonnaci]

agree x1000   the party is just getting started on ainsworth... longs should be buying and adding to positions, not worried about valuations   wood and osb supply is too low and we are in a rebuilding phase, who cares what happens 2-3 years down the line, we are worried where the share price will go 3-6-9 months from now   if the home building crazy is for real, we will continue to

[mapmaker]

 "not worried about valuations" I disagree because how much of ANS price right now is contingent on OSB price staying high this year? Q1 is already done in the books. But if OSB prices fall so will ANS. Momentum investors always get ahead of the game, look at CP and APPLE in the last year. I'm a value trader so I should take my 4X profit on ANS and leave the table. But i want to

[PAGODA5]

The question remains: IS the US housing market on the upswing or is it about to settle down?  My guess, as someone on this board already stated, I think there is some significant upside because there is a real shortage of OSB,plus I always believe you don't fight the fed.  Bernacke is pumping money into the system and no end in sight for 2013.  It will also take a year for the

[KevinKT]

 IS the US housing market on the upswing or is it about to settle down? _________________________ See WFT presentation on Jan 24, 2013, https://www.westfraser.com/sites/default/files/presentations/pdfs/CIBC-Whistler-Institutional-Investor-Conference-January-24-2013.pdf slide 10 which gives a US Housing Demand chart. It plunged in 2007-2009, and slowly recover in 2010-2011. The estimate

[estebancaballo]

Thanks for the link K.....looks like demand goes up over the next 6 months......if I am reading the chart correctly...good news for ANS

[PAGODA5]

Presentations are one thing, actual numbers are another.  I agree I think we are on the upswing.  A good employment number on Friday will push us higher. 

[[e-mail]]

I agree osb valuations until ANS cleans debt off its balance sheet are very important. If prices remained in the higher ranges for several quarters, ANS should be in a better financial position allowing for even lower osb prices driving PPS higher! The added volume from high river would then have a significant effect! 

[dosperros]

Let's all report the spammers like this @diot.   Ain't nobody got time for that.