td target price $1.75 buy recommendationfrom TD Waterhouse...
Western Forest Products Inc. (WEF-T) C$1.28
Western Announces a $100mm Dutch Auction and Commences Dividend
Event Western Forest Products announced plans for a substantial issuer bid of up to $100 million and the commencement of a regular dividend. At the limit, the share buyback equates to 16% of the current fully diluted market cap and will take place via modified Dutch Auction with a bid price range 2%-17% higher than yesterday’s closing price. The regular dividend will start in Q3/13 and will equate to an annual payout of $0.08/share (a 6.3% yield based on yesterday’s close – among the highest yields in the sector).
Impact POSITIVE – We are not surprised that Western FP is returning capital to shareholders, but the magnitude of the potential buyback and dividend level is encouraging. In our view, these initiatives are indicative of the company’s balance sheet/liquidity position strength and Western FP’s mid-term free cash flow prospects. While commodity lumber prices declined almost 30% during Q2/13, prices for several B.C. Coastal specialty lumber grades, including grades focused on the recovering Japanese market, have moved higher. We expect this trend to drive continued mid-term earnings growth for Western FP while many of its competitors cope with weaker results (at least during Q2/13). We reiterate our view that this equity is undervalued and maintain our 12-month share price target of $1.75 and BUY recommendation.