RE:Horseshoe -- status quo? Good Q. Let's discuss...I was looking for an old post and found a good thread from Dec 24 2019.
The bottom was some history I'd missed from Louel, like the mill's construction date in 1963, which was pretty interesting. He also has other comments in the thread which are very noteworthy about Ken's background in PG. I hope he's back to posting soon!
Right below is my comment from one year ago. I was wrong on a few fronts, but think I might yet be right on the $2.00,
as highlighted. The single biggest thing is the industry in its August 2020 high marked where it was pre-covid, eg fall 2019. I used IFP as my example. Then we weakened after August and have picked up steam to a drumbeat of 52 week highs. This is important as we can't compare CFF to its previous configuration as we all know. So if CFF was $1.80 in August 2020, that's my read of "pre-covid value" that's stabilized and after the shock of the wheeling and dealing. Does that make sense? it's a discount to all objective measures of course, but that seems like a decent benchmark.
Since I used IFP, they were $17.10 in their August high and now are $23. So up 35%. After all, it's logical given the current conditions are much better than those pre-covid in pricing, supply/demand, and macro climate (interest, housing #s etc.). So I'd expect CFF follows suit. They're no Interfor, but percentages are neutral and fair. Moreover, why should the market cap be equal (1.0x) the likely 2021 EBITDA? Crazy.
So, 35% on $1.50 is $2.01. I have 9 trading days to see if this forecast was valid or not. I'll need about 3.5% gains per day to make it happen. Stranger things have happened. I see Level 2's are all out of whack, with loads more buyers than sellers. Eventually that buying activity will swap the selling and this will run. I expect much profit taking, or bitter breaking even, around $2.00 so it likely sits there for a few weeks or months, before moving on -- if Q4-20 and Q1-21 are solid like I expect them to be. The important thing is this $1.80 baseline doesn’t reflect true value or upside, but just a reasonable valuation metric.
Looks like pretty similar %s with CFP and RFP too. If the others march to their 2018 ATH's in the coming months (very much in sight), and then beyond (I think this is likely), then a rise to beyond $2.00 for CFF is inevitable. The main question will be timing -- both how long and to what degree this lags the peer group -- and nasty surprises along the way.
Lastly, keep an eye on RFP starting up El Dorado, sounds like very soon. If they can make it run it shows great promise for a more capable operator to come in and tune-up the CFF assets. Obviosuly they spent some decent capital on it, but it's an interesting tale of the tape for M&A discussion I'd expect. What if mgmt ineptitude is truely what's been holding this back? What would BWC and Polar say about that???
dosperros wrote: First, I agree with you. I think an update is in order. My take is they cannot sell what is left -- it will crystalzie huge losses for the leaership and many invesotrs. I would vote to torpedo that, even with a superfical Jimmy P syle "80%% premium!" (see Canfor) to a wildly low baseline.
Mgmt was buying shares in the $5+ range. Blue Wolf bought in the $6.00 and they are rutheless. They need to get the SP to over $5 THEN SELL for a 30%+ premium. As I mentioned, this won't be that hard --they have simplicity and great markets on their side. Sculpin2's Polar take is bang on --check out the bios/profiles there. Those are not men who play games with lameducks -- they will force results which is what we need. They are the heavy hitters we need here. Wish they had more exposure.
"Core" is interesting. The only real core was always McK and the easy power money. The mill was also good too, and still is. FSJ was a trainwreck, and always has been -- at P&T, at Canfor, etc. That's why they got it cheap. Horrid worksorce. Never worked. Three line monster with awful conversion costs. I went thorugh it once and yikes, that's a nasty place. Good thing Hampton is gonna rebuitd it from scratch. Good divestiture.
Would they divest core this McK core??? Sure sounds like they tried. I agree -- better to sell McK for $X than all 3 US mills for $X. If they could have gotten US $160 M for McK then they would have kept the US South clearly. But they mentioned in the last CC they found McK buyers, but they weren't giving them fair value for the powerplant as it has some risk of residuals, forestry "scariness", or whatever. They wisely didn't force the issue and sell it below market value. Risk, for example, may be that a power co would be scared of reliance on a sawmill co of different ownership -- what if someone cuts off residuals for fuel? So some vertical integration may be smart.
So, they sold what had most market value. Fair enough. Regardless, McK is gonna have to light it up in terms of earnings now though. I think Ken stays to salvage his investment, and they have no heir apparent. Smarter people than me can point me to a petition or motion to remove him which I would happly join. Forget that guy. Yet, the devil you know right. And there is no Plan B now. Overall the leadership team looks pretty darn weak. Resolute will likely "keep" some of the mgmt they referred to -- hopefully Hans Thirr and Big Fella who inherited the US mills (forgot his name). Resolute will accept them, and then promptly remove ineffective VPs. I am curious If they stay or go, but that's not my problem. These RFP folks are some ruthless Quebecois who won't tolerate empty suits.
My main issue, which is resolved, is that the CFF gang needed to make those mills run and they had over a year to do it. I know it's hard there, but at the least have a google search and read a Wiki on "scenario planning" -- you pack of rubes. They did not make the mills run or plan for ups and downs. Better stewardship means they could have sold maybe 2 of 3 for the same price and retained some upside in the US.
I expect business as usual, and I'd be amazed if the shares were below $2.00 a year from now. I mean we are not even talking the need for a Donald Trumb Jr. to run this to make it win. Barron could do it. Thankfully we have Polar to crack the whip on these bozos; it'll be much easier to do so now that there is no need for large pay packages or expenses due to the simplicity of it all. I still have over 100k in shares and want to hold until maybe $3.50 which is possible, but I expect that might creep into 2022 and is subject to the lumber recovery getting back on track. Worst case if it stalls again I sell for over $2.00 here as it’s not hard and there is clear value.
Good luck to all and good discussion. I am excited all equal for the coming 24 months.
louel wrote: Well they sold the US mills where there were NO tariffs. The Macenzie gen plant depends on all mills running to supply the hog. The old FFI mill was built by Bob Cattermole back in 1963 and close to obsolete. Has had some upgrading but far from the efficiency of TOLKO's or CFP's They burned through the $60 M they got from Canfor then got some from Hampton. Sitll never made them stable. So what makes you think things have changed. Makenzie timber supply all long distance.
Shields should have stuck to selling cars for his Dad in PG The GM dealership was on George St and Sixth avenue. As he grew up in that business he would have had a far better chance of making a go of it.
If it is going to $2.50 On what assets ? 90% are gone. And when it was all combined it still topped out under $10.