October 7, 2021
Forest Products
Share Repurchase Monitor – Q3/21 Review
Our view: As expected, West Fraser was very actively repurchasing shares during Q3, repurchasing ~10% of its shares during the quarter. Interfor and Western Forest Products were also very active, repurchasing 5% and 4%, respectively. Cascades was the notable new joiner, repurchasing ~2% of its outstanding shares during the quarter. We expect that share repurchases will remain a preferred mechanism to return capital to shareholders going forward.
West Fraser repurchased 11.6 million shares, or ~10% of its outstanding shares during the quarter –
According to SEDI, the company repurchased 11.6 million shares for ~$879 million, or ~$75.53 per share. The majority ($778 million, or C$1 billion) was repurchased under the company's substantial issuer bid ("SIB") that was completed on August 20, 2021. Under the SIB, West Fraser repurchased 10.3 million shares at an average price of C$97.00 per share (or ~$75.37 per share). After the completion of the SIB, West Fraser repurchased another ~1.3 million shares for $102 million (or $76.81 per share). YTD, West Fraser has repurchased 16.2 million shares (or ~14% of outstanding shares since Norbord acquisition) for $1.2 billion at an average price of $74.38 per share. Relative to the current share price of $85.30 and our $125 price target, we view the share repurchases as highly accretive for shareholders.
Interfor repurchased 2.9 million shares, or ~5% of its outstanding shares during the quarter –
According to SEDI, the company repurchased 2.9 million shares for ~C$83.1 million, or ~C$28.83 per share (range: C$26.48 to C$33.40 per share). While less of the float was repurchased relative to West Fraser, Interfor has also been active on the M&A side, acquiring sawmills from Georgia-Pacific and WestRock earlier this year. The company also paid a one-time special cash dividend of $2.00 per share on June 28, 2021. Relative to the current share price of C$30.23 and our C$47 price target, we view the share repurchases as highly accretive for shareholders.
Western Forest Products repurchased 14.6 million shares, or ~4% of its outstanding shares during the quarter – According to SEDI, the company repurchased 14.6 million shares for ~C$30.2 million, or ~C $2.07 per share (range: C$1.89 to C$2.25 per share). Given that Western repurchased ~269k shares for ~$593k on September 28, the transaction would not have settled until October 1st and will not be reflected in Q3 results. YTD, Western has repurchased 30.6 million shares (or ~8% of its outstanding shares) for a total of C$63.0 million, or C$2.06 per share. Relative to the current share price of C$2.13 and our C$2.75 price target, we view share repurchases as a good use of capital.
Cascades repurchased 1.65 million shares, or ~2% of its outstanding shares during the quarter –
According to SEDI, the company repurchased 1.65 million shares for C$25.5 million, or ~C$15.44 per share (range: C$14.57 to C$16.13). The company became very active in September, with daily share repurchases exceeding C$1 million per day between September 7-21. Given the current share price of C$15.45 and our C$20 price target, we view share repurchases as a good use of capital.
Conifex repurchased 565k shares, or ~1% of its outstanding shares during the quarter – According to SEDI, the company repurchased ~565k shares for ~C$1.0 million, or ~C$1.85 per share (range: C$1.71 to C$1.97 per share). The company was consistently active through the quarter, albeit in smaller size.
Canfor repurchased 415k shares, or ~0.3% of its outstanding shares during the quarter – According to SEDI, the company repurchased 415,000 shares for C$10.7 million, or ~C$25.78 per share. The company was generally purchasing ~10k shares on the open market per day, or ~$300k. Relative to the current share price of C$26.98 and our C$45 price target, we view share repurchases as a good use of capital. Given the relatively smaller size of Canfor's share repurchases, we expect that the company will finish the quarter with the most conservative balance sheet of the group.