Pre-news rally. Good! And a mysterious press conf.....So, what's the deal with this?
"Media Advisory - Tembec will hold a meeting with the press immediately preceding its Annual and Special Meeting of Shareholders"
I like it. It could be anything, really.
The rally is just starting. The news is going to be excellent. Again, the "Street" is wagering that TMB is a company with revenue of barely over $100M a year. Last Q, as we know, was $57. That tells me that this is the new normal. TMB is in fact a $200M a year company.
So, will we clock in with earnings of -7M? This Thursday? Nope. That's what we'd need for the Street estimates to be valid. #fail.
For all you guys thrashing about and wondering how to know this stuff, I'd suggest checking out a MOOC. I liked this one. It's what I do for a living but that's neither here nor there.
https://www.coursera.org/specializations/wharton-business-financial-modeling Let's walk through valuation again. In 4 day's time we will see something like this:
- Earnings at ~$42M. +/- $5M.
- Implied annual earnings hikes to $195M.
- @ a multiple of 5.5, we get an implied EV of $1.072B
- We deduct the net debt of ~$650. It's 680 now, but they'll have paid off another $30 at least this quarter.
- 1072-650=$422M. This is the implied value of the equity.
- Divide by 100M shares = $4.22 a share.
Based on this, I suspect we'll see the price double in the next week or two. Now, let's walk through valuation again for a year out. In 369 day's time we will see something like this:
- Earnings at ~$60M. +/- $5M. (It's b/c there each pulp mill only shits once ever 12 or 18 months)
- Implied annual earnings at $220M.
- @ a multiple of 6.5, we get an implied EV of $1.430B. (e.g. 6.5 * 220) Why? Cause TMB will be a proven cash machine in a year with non-cyclical rev.
- We deduct the net debt of ~$530. This is the current less another $120M.
- 1430-530=$900M. This is the implied value of the equity.
- Divide by 100M shares = $9.00 a share.
And we can just keep forecasting the future. I see in 4 dimensions, I suppose -- the future is there is we wish to dig into it.
This is my moderate case where lumber makes no money. If we see a lumber bull market (~50% likelihood) then TMB becomes a company that can make $300M a year in EBITDA quite easily. Re-do the above @ $300M and things get real, and quickly. The above also illustrates the impact of deleveraging and how it alone can drive the SP up.
Good luck, and tune in to Jim's victory lap this Thursday!