RE:RBC Raises Price Target Good catch, thanks!
If anyone has the full text please post. I only have the abridged version. It's very conservative.
Valuation (10/20/2020): Our $2.00 price target is based on a blended ~5.5x EV/EBITDA multiple on our Trend EBITDA (weighted 85%) of $22MM and our 2021 EBITDA estimate (15% weighting) of $33MM. We believe that CFF should trade near the low end of the typical range for Canadian Paper and Forest Products companies (range 5.0x to 7.0x), reflecting Conifex’s smaller size, limited operating footprint, and higher relative exposure to British Columbia. Our price target supports our Outperform rating.
I think a 5.0x multiple on lumber will likely rise with the improving outoook. And my ongoing pet peeve is the squandering of the annuity power earnings which should trade at 10x.
Paul is assuming maybe $20M in earnings in lumber in 2021 which is reasonable. That's a bit under $100 CAD per MFBM. It could easily be double that if lumber stays at $500 US per MFBM.
So when this hits $2 or $3 per share I'd expect to see something like this:
Power: 14M @ 10x = $140M
Lumber = $20 to 40M @ 7x = $140 to $280M
No debt. So $6.08 per share to 9.00 per share in the next bit. I think a sale is more likely however. The issue now is it's such a underpriced animal the optics of a sale are awful. If I'm Resolute I can't pay $6/share for this as I'd look foolish. Moreover BWC and co would want closeer to $10. I think the first bid at $8 takes this out... whenever they can justify it.