Per RBC October 28, 2021
Acadian Timber Corp.
In line quarter; reiterating Sector Perform
Our view: Acadian Timber reported Q321 results that were in line with RBC/consensus expectations, with the outlook for most markets somewhere between stable and strong through the rest of the year and into 2022. Although the dividend yield remains attractive in a yield-starved market, we see catalysts given that the carbon credit opportunity will take a few years to play out. Therefore, we are reiterating our Sector Perform rating and $18 price target.
Key points:
Reiterating our Sector Perform rating and $18 price target – Our price target is based on a 16.5x blended EBITDA multiple on our trend EBITDA of $23.5MM (85%) and our 2022E EBITDA of $23.2MM (15%).
Q321 results were in line with our expectations – Adjusted EBITDA of $5.1MM was in line with our $5.8MM forecast and consensus at $5.7MM.
New Brunswick Timberland Adjusted EBITDA of $4.2MM was in line with our $4.3MM forecast – Sales of $17.5MM were slightly below our $18.3MM forecast, driven by lower-than-expected softwood, hardwood, and other log sales and was partially offset by higher-than-expected biomass sales. Shipment volumes of 209k cubic meters were below our 229k cubic meter forecast, due to lower-than-expected softwood, hardwood, and biomass volumes. The segment Adjusted EBITDA margin of 24% was in line with our 24% forecast.
Maine Timberland Adjusted EBITDA of $1.3MM was in line with our $0.8MM forecast – Sales of $5.2MM were below our $5.3MM forecast, as lower-than-expected hardwood sales were partially offset by slightly higher-than-expected softwood sales. Pricing was strong relative to our expectations, while shipment volumes of 62k cubic meters were below our 70k cubic meter forecast. The segment Adjusted EBITDA margin of 26% was well above our 15% forecast.
Demand for softwood sawlogs remains steady – Acadian expects that North American softwood lumber demand will remain steady through the end of the year. In the company's markets, demand for softwood sawlogs is expected to remain steady as Acadian's sawmill customers continue to invest in their facilities and operate at steady levels. Increased lumber production is having a negative impact on softwood pulpwood markets given the elevated supply of wood chip residuals. Acadian expects to see strong demand and pricing for hardwood sawlogs through the remainder of 2021 and into 2022. Hardwood pulpwood and biomass demand is stable.