TSX:WFG - Post Discussion
Post by
retiredcf on Jan 22, 2024 9:08am
Scotia Capital
Scotia Capital analyst Ben Isaacson initiated coverage of five paper and forest product companies on Monday. West Fraser Timber Co. Ltd. (WFG-N, WFG-T) with a “sector outperform” rating and US$100 target. The average is US$110.
Mr. Isaacson: “West Fraser offers investors the best way to gain large cap Canadian equity exposure to a recovery in both lumber and other wood products commodities markets, as well as exposure to a turnaround in the U.S. housing cycle. This is more relevant now than in the past, given a rising expectation of interest rate cuts in ‘24. Following its transformational acquisition of Norbord in ‘21, results show less margin variability in the more diversified portfolio. This, coupled with reduced B.C. exposure should lead to slight margin expansion over time - another reason why we like the stock. WFG is already one of the lowest-cost producers in the space, resulting in industry-leading margins on a through-cycle basis. Finally, we like the balanced approach to capital allocation, with free cash flow directed toward growth opportunities in the U.S. South, maintaining a healthy balance sheet, as well as returning excess cash to shareholders (50 per cent returned since ‘17). WFG is the only Canadian player to pay a stable distribution”
Be the first to comment on this post