L2's showing $1.70 (again). $700+ lumber (again). $7/share??The groundwork is laid. There's 91,000 shares up for sale at $1.70 and chump change below that. It might take a few weeks yet to shake out the cobwebs in the $1.50 range.
I see RJ bought another 12,500 shares today. There was a question about them buying from themselves and making other transactions. I think the process is likely separated; they can buy back to cancel, but still buy/sell for clients. On reporting, I see it can depend. Keep in mind reportthese guys can't even update thier website or post presentations online anymore, so don't hold your breath on proactive reporting. That's not thier fault as they're lean, and Jordon the CFO seems highly capable, but we all get busy. Anyway, I'd read this on the TSX terms and conditions regarding NCIBs and think they'll need to be reporting in early January on what the damage was:
Reporting Purchases to Exchange:Within 10 days after the end of each month in which purchases are made, the company must report to the exchange the number of securities purchased in the preceding month, providing the dates of the purchases, the average price paid and stating whether the securities have been cancelled, reserved for issuance or otherwise dealt with. No reports are required during any period in which no purchases are concluded. The company can delegate the reporting requirements to the exchange member appointed to conduct the NCIB on its behalf. However, it is the company’s responsibility to ensure that the filing requirements are met.
Anyway, if we had a year of earnings at this level (who knows, may be possible) you'd be looking at a minimum of $300 USD margins. CFF cash cost breakeven is $360, but there's some overhang with low grade, variable BC stumpage, etc. But the main consideration may well be that -- should this persist -- we could see $72M annual mill earnings. I use $50M... but the momentum just keeps building. Add the power cash to that.
Notably, I see IP (the paper co) divested its consumer paper biz to spin off. Maybe worth noting -- if the cash spewing mill can't get a decent valuation, spin it off and focus on power. But don't act rashly -- start by paying a regular div and you'll see this race up. Ken really thinks he can ignore this. A NCIB is great as its tax efficient, but you must pay shareholders if you don't want a garbage valuation. I know it's hard to put the cat back in the bag and Ken doesn't want to tie his hands and yadda yadda but at some point you are going to need to STFU quit making excuses, and pay 10c a share. It'll cost you what you're spending annually on the NCIB and a safe 7% will lure buyers in.
Finally, RYAM disclosed it's time to sell (or consider selling) their Canadian assets. When that happens it's going to be a mad rush to grow for the bridesmaids. CFF will be a prime target. No lumberjack wants to be left behind.
So what's valuation look like in Q4-2020? Start on debt. I'd say they add an extra $15M in cash. Then Q1-2021 likely adds $15M. Then by reporting for Q2-2021 there should be zero net debt. Then we have a market cap = enterprise value. It's currently $70 M in market cap. Thus, I see this trading a ~1x 2021 cash earnings. Maybe at 0.8x if they can earn closer to $85M in 2021. I use more than RBC's number, updated to $31M in EBITDA in 2021, to over $40M. So $40M * 5x (the bottom of the shelf valuation, the lowest in the equity universe, reserved for the saddest and mangiest dogs in forestry and coal power). That's the worst case scenario midway through 2021 is a market cap of 3x what we have now. So I expect $4.50/share in this case, the 5x valuation overlaid with no debt.
A more bullish case might be locking in $50M in annual earnings, multiple exapnsion to 7x (still criminally low given power generation is 12x), and a reduced share count. That would be over $7/share.... then by 2023 when the NCIB has this down to <40M shares, its' more like $9.00/share.
I'd really like a shareholder presention however to lay some of this out. These guys need to figure it out. Apparently that's quite the tagline in Letterkenny.
Figure it out:
https://www.youtube.com/watch?v=_xEyWlKpAw0