Bullboard - Stock Discussion Forum Interfor Corp T.IFP

Alternate Symbol(s): IFSPF

Forest Products Lumber & Wood Production

Interfor Corporation is a Canada-based forest products company. The Company and its subsidiaries produce wood products in Canada and the United States for sale to markets around the world. The Company operates through solid wood products segment. The Company offers its products across two categories, which include Dimension Lumber and Specialty Lumber. The Company's products include Interfor... see more

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TSX:IFP - Post Discussion

Interfor Corp > TD 2

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Post by retiredcf on May 13, 2022 8:54am

TD 2

Interfor Corp.

(IFP-T) C$32.73

Capital Deployment Gaining Pace Event

Interfor reported Q1/22 results after market close on May 11. Adjusted EBITDA of $570.1 million was slightly below our estimate of $588.4 million and the consensus forecast of $603.6 million. Adjusted EBITDA included a $68.0 million fair value inventory adjustment related to the acquisition of EACOM Timber. Our estimate included a $70.0 million value adjustment; it is unclear to what extent this factor was embedded in the consensus forecast. Adjusted EPS of $6.61 was below our estimate of $6.94 and the consensus forecast of $6.97.

Impact: NEUTRAL

Excluding the EACOM fair value adjustment, recurring adjusted EBITDA of $638.1 million was 26% above our estimate of the company's annual mid-cycle (trend) potential. Surging lumber prices more than offset volume constraints and cost inflation. Interfor's lumber price realizations jumped $588/ Mfbm (+72%) q/q; this lagged our forecast but was consistent with the peers' trends.
EACOM generated material results out of the gate. Excluding the fair value adjustment, EACOM contributed adjusted EBITDA of $73.1 million in less than six weeks of ownership (11% of total Q1 adjusted EBITDA).
Interfor is deploying capital at a rapid pace. The company repurchased 5.0 million shares (8% of the total at the end of 2021) for $194.3 million in Q1 and completed its 10% NCIB in April. Despite share buybacks, the $731.2 million EACOM acquisition, higher working capital, and a large tax payment, Interfor ended Q1/22 with minimal net debt and abundant available liquidity of $483.3 million. Q1/22 FCF was $3.78/share (11% yield for the quarter).

We reiterate our BUY recommendation and $50.00 target price. Small revisions to our mid-term free cash flow outlook are not significant enough to warrant a target-price change.

TD Investment Conclusion

In our view, Interfor's current valuation represents a compelling entry point for investors with anything beyond a short-term investment horizon. We forecast above- trend lumber prices through the end of 2023. Adjusted for expected FCF through the end of 2023, we estimate that Interfor’s trend EV/EBITDA multiple is 2.8x — a steep discount to the company's historical trading range.