valuation exercise Let’s do some rough FGE valuation. Quite easy now that it’s a single dissolving pulp plant.
With the 5th digester now running, the 2019 capacity is 182,000 admt/year.
Currently and for the last couple years, dissolving price is around $USD 935/admt.
Cost/admt has been trending towards the target of $CAD 850 delivered.
My assumption is that we will be there on price and cost for 2019.
Foreign exchange is around 0.76 $USD / $CAD for a while now.
935 $USD / 0.76 = $CAD 1230 price/admt
182000 tons * ( 1230 - 850 ) = $CAD 69,160,000 EBITDA
Using a conservative EV to EBITDA multiple of 5x (could be 6x)
we get an entreprise value of $CAD 345,800,000.
We have about $CAD 200,000,000 of net debt (from memory),
so removing it from EV leaves a market cap of 145,800,000.
We have 14,950,000 shares so it means a value of $CAD 9.75/ share.
That’s my base scenario. DWP prices could rise to $USD 1200.
EV multiple could reach 6x. Xylitol project could yield nice results.
An extra 20% of productivity should be possible for power generation.
Same for extra pulp production over the next few years.
Recent trading is $1.50 and my target is $9.75, a multi-bagger!!
$9.75 is about 1.35x book value, so not unrealistic
Can you find holes in this valuation ?