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West Fraser Timber Co Ltd T.WFG

Alternate Symbol(s):  WFG

Forest Products Lumber & Wood Production
West Fraser Timber Co. Ltd. is a diversified wood products company. The Company is engaged in manufacturing, selling, marketing and distributing lumber, engineered wood products, including oriented strand board (OSB), laminated veneer lumber (LVL), medium-density fiberboard (MDF), plywood, particleboard, pulp, newsprint, wood chips and other residuals and renewable energy. Its products are used in home construction, repair and remodeling, industrial applications, paper, tissues, and box materials. Its segments include Lumber, North America engineered wood products (NA EWP), Pulp & Paper and Europe EWP. Its business comprises lumber mills, OSB facilities, renewable energy facilities, pulp and paper mills, plywood facilities, MDF facilities, particleboard facilities, LVL facility, treated wood facility, and veneer facility. The Company operates approximately 58 facilities in Canada, the United States, the United Kingdom and Europe. It also offers wood preservation services.


TSX:WFG - Post by User

West Fraser Timber Co Ltd
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Post by retiredcfon Dec 28, 2022 10:22am
205 Views
Post# 35193418

TD

TDDecember 21, 2022

Our High Conviction Buy

West Fraser Timber Co. Ltd. WFG-N,T: US$73.79; BUY 12-Month Target: US$100.00

We highlight West Fraser as our top pick in the sector based on the company's strong position to pursue growth. We forecast below-trend earnings for West Fraser over the next two years but expect that the company's robust balance sheet will support ongoing value-accretive growth initiatives (organic and M&A).

West Fraser ended Q3/22 with net cash of $824 million and available liquidity of $2.375 billion. We forecast a 33% y/y increase in capex in 2023 to US$600 million, reflecting the US$255 million rebuild of the Henderson, Texas lumber facility (construction scheduled to start in Q4/22).

Valuation remains attractive in our view. Adjusted for FCF assumptions through the end of 2024, we estimate that West Fraser currently trades at 3.3x trend (mid- cycle) EV/EBITDA — a pronounced discount to the long term average of 6.0x. In our view, the discount to historical trading ranges is excessive and represents attractive value, especially in the context of a potential Kronospan bid. Our forecasted FCF yields of 4% in 2023 and 8% in 2024 are muted, but, absent external growth initiatives, we still expect West Fraser to end with a net cash position by the end of 2024.


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