Conifex Timber Inc T.CFF

Back of napkin valuation for two share count assumptions

[dosperros]

Elmer got me thinign about this.

ElmerFudd69 wrote: It's also quite bold of the CEO to price the stock near $5 per share. Looks like the financials are already reflecting that behind the scenes.

Interestingly, $5 is pretty conservative.  Here's my largely off the cuff revisited sum-of-the-parts valuation.  This assumes $0 net debt, something that will be halfway there for Q1 and fully there for Q2.

 

Below I do two basic cases.  The sawmill per a Dunkley 2019 transaction (likely worse assets) and then a level closer to the current rate but still below.  New capacity is $650/mfbm USD, older transactions are in the $500/mfbm range USD. 

Now, in the above, if we see persistent $700 lumber however we'd value it likely on 5x EBITDA, and that would be margins of $300 USD over 240,000 MFBM, so it becomes a lot more valuable... too much to bother writing (5x on $72M/year @0.8 exchange = $450M.)  I'm more comfortable using $84M to $120M for this.  Maybe the cash version is sustained $550 lumber, so even at 5x that's worth $225M.

 

Timber tenue has changed hands before. I suspect it's the "high case" today as it's sold for $150/M3 before. This is moving to higher quality fibre at a time when the worst of BC stumpage $ is over.

 

The powerplant is likely 10x EBITDA.  Deloitte has int globally at 10x in 2016 and Bloomberg at 10.4x.  I used 10x.  You could also use the replacement cost which is a tougher metric but I gather is likely $2000/KW, which roughly jives with what they spend (but ignores the fact it was cheaper as they cannibalized an old pulp mill).  It's a good asset.

• Power build cost (page 40)
  • https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2012/RE_Technologies_Cost_Analysis-BIOMASS.pdf
• Power valuation (page 25)
  • https://www2.deloitte.com/content/dam/Deloitte/it/Documents/energy-resources/Business%20valuation%20parameters_Energy%20industry.PDF

Last of all, I did the current share float as the safe scenario.  This was between $4.85 CAD per share to $7.84 per share.

 

If you assume 30% of the shares are bought back (say the 10% for the NCIB plus 20% for a SIB) that takes you to 32.2 million.  In this case, the same bundle of assets is worth $6.93/share to $11.20/share.

 

Details below.  I'm sure the formatting is going to be awful.  I'll start a blog eventually and post more of this soon.

 

Asset	Metric (capacity)	Low valuation	High valuation	Low Value	High Value
Sawmill (valued: $/mfbm)	240,000	$350	$500	$84,000,000	$120,000,000
Timber tenue(value $/M3 annually)	670,000	$100	$150	$67,000,000	$100,500,000
Power plant ($/KW replacement or 10x EBITDA)	36	$2000 (per KW)	10x EBITDA	$72,000,000	$140,000,000
				$223,000,000	$360,500,000

Shares	Note	Low	High
46,000,000	Baseline	$4.85	$7.84
32,200,000	Post SIB	$6.93	$11.20

[MohamadJ5]

[Rational43]

I bought into this one over the past few days.  Tough to find a lumber producer trading at 1/3rd of 2018 levels.   Its not exactly the same company, but the value here is undeniable, and any sizeable share buybacks will propel this towards a significant "catch up" move with the rest of the sector.