Fortress Global Enterprises Inc - Class A FTPLF

RE:RE:RE:What the heck just happened?

[belowIV]

mrmoribund wrote: Comforting thought, though I suspect selling FSC could ultimately prove to be penny wise and pound foolish. The market, since bouncing off the lows around $1.80 (and, briefly, even lower) may be picking up on the encouraging signs of a possible recovery in the cotton market. Cotton and dissolving pulp are substitutes for each other and they, by and large, move up and down in price together. The cotton ETF (NYSE: BAL) closed at $43.49 today, which is up from its low of $39 in late January. Add in the benefit of the low $Cdn & the operational improvements the company is working on at FSC and it may be that FSC is closer to turning cash flow positive than many people realize. If and when it might turn cash flow positive (even better, positive company earnings) look out because even with the current weak sales numbers Fortress currently has about $20 per share in sales. If cotton were to go back to a more typical 80 cents per pound, and dissolving pulp rise in line with that, Fortress Paper, likely then moderately profitable and with sales then above $20 per share, could quickly become palatable to institutional investors (again) and rise to something like 50-70% of sales or $10-15 per share. There is huge operating leverage here.
That said, I'd never pretend that risks don't remain. There is still a lot of cotton inventory around the world, especially, as is well-known, in China. If BAL is jumping the gun and cotton moves back down below 60 cents then Fortress will continue to struggle, though the operational improvements will help.

The excess cotton inventories are largely Chinese and of very poor quality with an ongoing deterioration in quality the longer its stored.  The poor quality cotton won't directly compete with Fortress's DP. More important in my opinion is the oversupply of the VSF market. As VSF supply comes back into balance and capacity utilization ramps back up, the DP price should respond.