FFHWatcher
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Posts posted by FFHWatcher
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Also exercised most of my rights today, however I hold some FBK in my TFSA and since it is maxed out I would have to transfer those rights out which would take several days and since tomorrow is the last day, I guess I'll let them go. I probably have enough in FBK already. As Uccmal says - here goes nothing!
I really feel that the rights offering has artifically lowered the price on FBK and after a couple of weeks I would hope to see at least some increase in share price. The biggest problem that I see is in what goes on with the markets and economy on a global scale. My optomistic side says that we are on the tail end of a correction and hopefully it should level out soon and reverse itself by mid September. Then again, I have been wrong before.
I ran into the same issue with my TFSA but then I started doing the math. 10,000 rights in TFSA @ 0.005 cents is...nothing. If you want to buy 10k shares @ $1.01 just buy the rights on the open market for...nothing and exercise them in your regular account or just buy them for 2 cents more on the open market and spend the extra $200. Either way, not worth transferring and deregistering $$ from TFSA and doing all the friggin' paperwork involved. If you buy the rights, you are immediately able to notify your broker that you want to exercise them. You do not need to wait until they settle. The cut off date for my broker (ScotiaItrade) is July 12 (today) on their paperwork but over the phone they said they have until the close on July 13th.
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Rights just showed up in my canadian ScotiaItrade Account. Nothing yet in my Qtrade acct. Showing a value of 3.5 cents.
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Couldn't we simply run our charity dollars through the government? The gov't could set up their taxation system to tax the wealthiest individuals and wealthiest corporations more and then re-distribute those dollars to various pockets of society that need it the most (education, health care, employment, etc). If the taxation system was progressive enough, it could tax the wealthiest to the point where they couldn't afford the Mercedes anymore and the gov't could put those excess funds towards programs to benefit the less fortunate in society.
That could work, couldn't it?
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I just buy FRFHF rather than buying FFH on the TSX through Etrade.
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why not buy FFH in US $ on the TSX? FFH-U.TO
It is new, looks like almost no volume but I would think that there must be a broker who will fill your order if you put it in at a reasonable #? No conversion. FRFHF.PK is trading pretty a pretty good volume. As far as paying $20 ? How many trades are you expecting to make on a $375. stock?
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Keep in the mind that the $2B gains from CDS's and the money made from hedging are not counted anywhere in their equity or bond performance numbers (I believe). I am guessing that $2B here and there would really pop the long term numbers!! They aren't sure where to put them so they leave them un-categorized.
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FFHWatcher,
Thanks for your response. The negative issues which I raised in my question was not intended to influence anyone's response. Its just that I am trying to understand Prem's interest in this company and Tom Ward in particular. Given the $100mil hqtrs building he recently erected, the shareholder dilution, and the high debt, I don't think he has been a good steward for shareholders.
I would go back and do some more research on Tom. If Tom felt $100M was required/justified for his H.O., than Aubrey M. (CHK) would likely spend $500M? It doesn't make it right but from the research I have done on Tom W., I don't feel the same way you do. Go back and start fresh with an open mind? SD is growing exponentially (with huge debt, yes!!) but given their size now, $100M for their headquarters is becoming more and more justifiable versus when it was announced. There is no doubt that Tom W. and almost everyone else in Nat Gas are WAY more aggressive than your average Value Investor.
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Can anyone elaborate on what was said about Sandridge (SD). The company has high debt. Seems to have sold cheap gas assets to buy expensive oil assets. Recent $100mil office headqtrs building did not seem like a good use of capital. Also, Prem's recent conversion of 7mil common shares to 8.5% converts seems to mean that recovery in these shares may be a long time in the making. Did Prem elaborate on his opinion about Tom Ward as a CEO.
Thanks.
Prem didn't mention SD at all during the public presentation. I believe I did see Tom Ward walking around. Sam Mitchell discussed SD in some detail during our dinner. Essentially, SD are extremely data driven and know the area better than anyone else. He (and SD) also believe that simple (non-fractured?) drilling with less annual depletion is a better long term, low cost solution than the Shale plays/high fracturing needed in some areas. He said that the Forest purchase was very cheap. Arena purchase not so cheap but still pretty good value.
Might I respectively add or suggest that you avoid asking a question about what someone else thinks/feels/said about something and then proceed to list your personal (negative) opinions on the subject. In my opinion, you are telling the reader that you are hoping to respond, that you have already made up your mind on the subject. It injects conflict into your question right at the outset, IMO. You may be able to get a higher quality response with more detail if you avoid asking leading questions. Essentially, the reader did not need to know your opinion in order to fully respond to your question and in my opinion, your response will be biased one way or another based on what you included in your question.
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Look at the Dec-31-2009 MD&A, pg 7, Selected Annual Information. Compare 2009 against 2007. Add operating profit to sales for each of NBSK & RBK to get Cost of Sales, & divide incremental sales by incremental tonnage to estimate COS sensitivity to volume. About -1.334 for NBSK, and -.476 for RBK.
Look up the list price/week for NBSK & RBK over Q1-2010 & calculate the average for the quarter. About 860 for NBSK and 780 for RBK, depending on assumptions. Assume the NBSK plant ran for 3 months at 90% capacity, less 4 days of downtime. Assume 85% capacity for the US plants. You now have estimated tonnages, you can derive average COS for each of NBSK & RBK, & can calculate estimated CM for both NBSK & RBK.
Look at the 2009 S&A, subtract the 2009 charge off, & subtract 1.8 million of 2010 savings; divide by 4. Best guess the Q1 distribution number & calculate the Q1 EBITA. Then compare it to Q1-2007 when conditions were `roughly` similar. Illuminating.
Now for fun: Multiple the Q1 EBITA by 4, divide by the number of shares, & multiply by 5, isn`t this pretty much the lower number to beat if they were to be taken out. Now discount the EBITA by 30% (for MOS) & stay with the 5x multiple (additional MOS), isn`t this about where we should be before the technical factors from conversion kick in. Look at the deb - if it converted there would be roughly an additional 10.7 million shares outstanding; price at the lower estimate & what seems pretty obvious.
Speculation, but arithmetic works pretty well for everyone.
SD
When you eventually sell your SFK stake, take 10% of your profit and buy a nice (used, of course) sports car with the license plate ***SFKGURU*** and find a new hobby. You wake up in the middle of the night thinking about SFK...I know you do :-)
p.s. Thanks for all your input on this one. Extremely Valuable. Value is certainly hard to see sometimes. I believe this one is playing out faster than any of us thought, thanks to the perfect storm for pulp pricing. I am sure there are a dozen or so of us who can chip in $5/ea to buy you dinner if you are attending the FFH Dinner with Sanj? Heck, probably even a plane ticket and a hotel :-)
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If you like the way FFH invests than you should consider Francis Chou. http://www.choufunds.com
One of the best Canada has to offer, IMO.
I use his Associates Fund. It has all or most of his best ideas in it.
Only issues are that he has US$ exposure which has not been heading in the right direction in the past 12 months for CDN Investors (he has hedged before and has that option in the fund) plus it is $500M (I believe about $100M of the $500M is money that FFH has invested in his fund). Yes, I know $500M isn't considered large but the smaller the better in most circumstances, IMO.
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SD - you consider trading on this information illegal or potentially illegal?
You can determine pricing on your own (as people have done), and drive by a mill to see the inventory... The shutdown time is reasonable to know as well. I consider all 3 data points fair scuttlebutt.
I don't see any way this could be construed as insider info. Where am I wrong?
An issue would be trading on the CFO telling you they were shopping it and already had 3 bids or something - (just a hypothetical example)
I don't own SFK FWIW
Fortunate for people who do trade on inside information in Canada, we really don't have a securities regulator. Or, I should say, our securities regulator(s) are more concerned with what is on page 6 of a disclosure form that clients must sign, but never read.
Of course, if they do attempt to prosecute a securities violation it will end up being thrown out of court after 8 years of the lawyers deferring everything imaginable, or it will be settled out of court with the guilty parties not admitting any wrongdoing or they will be put on probation for a year and have to pay court costs. I am not aware of any serious deterrents in Canada for securities violations.
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It was a Grant of restricted shares which vest on April 1, 2015.
several other insiders received similar, but lower amounts except for Andy Barnard, and those were filed in March 2010. It only seems that Christiansen was in April 2010.
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Ok, I give up.
Why is it so difficult for American's to buy shares on the TSX? Is it our Third World status? You don't like our Prime Minister? You don't like that we still send all our tax revenues back to our Queen? You don't like that our Canadian Tire money is now worth more than the US $ ? You don't like that we close our stock markets for 6 months for winter? What's up?
We buy shares up here on American exchanges all day long for $10. or less and you don't need a special broker. We have accounts that are US dollar based and one's that are Cdn dollar based so we don't have to convert the currency on each transaction. It is all very cutting edge for Canadians, eh.
TSX (Toronto Stock Exchange) and the TSX Venture Exchange are the two national stock exchanges here in Canada. TMX Group operate both. TMX is a $2B publicly traded company. About $5B worth of shares are traded daily on the TSX.
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I checked Sedi.ca
That is the site for the Cdn Securities Administrators and you can find all Canadian public company insider trading reports on this site.
It looks like it was just the time of the year where various stock grants, employee share ownership plan purchases, etc. were carried out. Nothing major.
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Interesting game FFHwatcher, 2 days and less than 1 million dollars worth of shares change hands and you're ready to say the analyst was right...
I was simply saying the guy/gal doesn't have a clue what the company is worth or how much money they're making. He didn't increase their target from .50 cents a share to a dollar till the stock was trading at around 1.40.
Don't let a Bipolar Mr. Market tell you what something is worth, its like the tail wagging the dog... do your own research.
I am just reminding posters of the previous discussion regarding the Dundee analyst and I am certainly not saying the game is over, as I am still long. I am just stating what the current score of the game is and Dundee is winning. I think the market currently agrees more with Dundee than with you and other posters as to what the company is currently worth. Recall that there were only about 2M shares that moved the price from $1. to $1.40 in the weeks leading up to the earnings announcement, so why was Dundee so wrong with stating their target price at $1.? Perhaps they were thinking along the same lines as the Bipolar Mr. Market? Perhaps they were thinking that based on their analysis, SFK results were going to be on a completely different level than Canfor Pulp's and just because 2M shares pushed up the current price, that was no reason why he would increase his target price?
I am having troubles reconciling your specific statement, "I was simply saying the guy/gal doesn't have a clue what the company is worth or how much money they're making." What did you mean by how much money the company is currently making? The company is pretty clear in their financial statements that they lost almost $80M ($100M in market cap) in 2009 including almost $16M in Q4. At this point in time, it is hard to understand that SFK is worth $100M or more based on current earnings. Net assets (likely) but on earnings? What happens if NBSK goes back to $650 or even $700? What is SFK worth at those prices? At least one analyst believes that this (nbsk) price is unsustainable and that the companies that can't make money at these NBSK prices are in real trouble if it retreats at the same rate that it increased.
Go ahead and rip away...
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Well you gotta hand it to Dundee, eh. That's quite a risky prediction saying that SFK might actually run all the way up to a buck. Oh yeah, the last trade was at $1.42 so it seems kind of a safe call. Of course since they had been predicting $0.50 - anything looks better.
I would suggest that there are a number of members of this board that could get an analysts job at Dundee.
I used to believe some of those guys until I learned the hard way how expensive that could be. Really, do they actually get paid for their opinions?
My rant of the day.
I totally agree with others that analysts do some questionable things that leave you scratching your head. However, perhaps this Dundee analyst should be given more credit. Within 24-48 hours of his call, he was more right than most of us discussing $2., $4.50 BV., worth over $5., comparing it to Canfor Pulp, etc. If the then current price of $1.42 with a target price of $1.00 made him conservative looking like a goofball, what does the share price hitting his exact target on the following day mean? Was he right? Did he make an awesome call that could have saved many 40% in one day? How easy do you think it was for him to make that call? He knew he would be ridiculed for such a move. Why do what he did? Wouldn't the easy call be "We think SFK is currently fairly priced."
At this point in the game which started the week or two before Q4 release of results for SFK, I would score this game; Dundee Analyst 1, Cornerofberkshireandfairfax.com Board 0 (excluding the posters such as SD who thoroughly discussed/analyzed SFK at under $0.40
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Uccmal - that was what I meant.
Re: RBK - that would not be an easy problem to solve unless all those subsidy stop.
During the CC, management mentioned that the two great negatives that greatly impact the profitablity of SFK are reversing:
1. US sibsidy (helps RBK)
2. High cost of Quebec wood chips. (helps NSBK)
Stove - are you sure the biomass is same as black liquor? The management didn't mention this one on their call.
2010 should be better than 2009 for sure. I am a buyer today *unfortunately, was a buyer yesterday as well*
From Wikipedia...
Biomass sources
Biomass energy is derived from five distinct energy sources: garbage, wood, waste, landfill gases, and alcohol fuels. Wood energy is derived both from direct use of harvested wood as a fuel and from wood waste streams. The largest source of energy from wood is pulping liquor or “black liquor,” a waste product from processes of the pulp, paper and paperboard industry. Waste energy is the second-largest source of biomass energy. The main contributors of waste energy are municipal solid waste (MSW), manufacturing waste, and landfill gas. Biomass alcohol fuel, or ethanol, is derived almost exclusively from corn. Its principal use is as an oxygenate in gasoline
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I'm comfortable with cash at 19 million going forward with market prices up more than 100$ on average from last quarter I think we'll like what we see 2010 as well! During Q3 08, Ebitda was at 16 million, the cost savings from all phases of cost cutting will start to really show up in the results during Q1.
Selling energy should give them about 6-7 mil per year starting 2013.
How did you estimate the value of the energy deal with Quebec Power? Two more full years until revenue starts to kick in, at best. 9.5MW @ 11.2 cents/kWh. How does that convert or is it convertible?
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Keep in mind that the inventory figure includes wastepaper, parts for machinery and others. It is not all saleable pulp. From the annual report, around 50% is pulp or $55 million out of $109.
If we apply the same ratio to the March 31 figure we get $62 million in pulp. Although, I agree with you. It seems like a low hanging fruit that they should go after agressively.
I am not planning to buy more at this time. I think that I will wait to see what gets done. I would also be very hesitant to buy the convertibles when you can go out and buy CFX.UN. It came back down recently because Dundee Securities downgraded it to a sell because the stock was ahead of itself. This one is a double from here and I would not be surprised to see it go back to $10 if pulp goes back to $900. Definitely a low cost producer, low risk and very nice upside from here.
Cardboard
Just doing some history work on SFK and noticed the above post from June 1, 2009. CFX.un Price closed at $2.09 that day.
CFX.un just surpassed $10. plus distributions
NBSK is now $874.
Not a bad call, I guess, but who wants that tax liability :)
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Isn't it almost comical that Google Ads is advertising at the top of this Message Board by asking,
"Shareholder Alert - ZNT
Unhappy with Zenith National Deal? Call 212.363.7500 or visit
www.zlk.com"
(I apologize if it was already mentioned. I haven't read all the thread)
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Looks like FFH added 1.2 million shares in Dec (at $30) and just under 1 million in Jan (at $29.70). This is in addition to the 991,000 they held at the end of Q3 (up from 554,000 at end of Q2).
Results reported today looked pretty ugly (underwriting loss and falling dividend and interest income). Outlook for future is bleak (business will continue to shrink and underwriting will likely remain over 100 until economy improves which is going to be when???).
Shareholder equity = $28.25/share.
Shares (ZNT) closed today at $27.90 Let's see what Mr. Market thinks about results on Monday...
For those who have not followed FFH for long, FFH owned a significant portion of ZNT a few years back and sold much of that stake for a nice gain when they needed cash. FFH understands this company very well and perhaps this is simply another situation where they are re-establishing postions in stuff they had to sell in the 7 lean years...??? Anyone have an update on HUB???
You asked about Hub. I am assuming Hub International? It was acquired in May/June 2007 for $41.50 by Apax Partners. http://www.apax.com/en/news/story_1718.html
They are a private equity company.
Hub International was created in about Nov. 1998, IPO'ed in Feb/March 1999. They were a consolidator of insurance brokers in Canada, mostly Ontario at first. Hub did a lot of business with Lombard Insurance (Northbridge Subsidiary) and Lombard was involved with some financings of the earlier brokerages. Fairfax got involved when they started to think bigger and it probably looked better having FFH financing an insurance brokerage consolidator versus Lombard Insurance who would directly compete against Hub's insurance suppliers. I believe the IPO was done at $13.50 (Cdn $) in Feb. 1999 and purchased at $41.50 (US$) around May 2007. 8 years for a triple plus currency exchange. I believe FFH had common (probably purchased at $10) plus a convertible debenture which was converted. I can't remember the price. Needless to say, a better than average ROR.
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SD has a good investor presentation and a webcast on their website that is more fwd looking. Their financial statements give you a sense of their past but because it is so short, it is hard to determine their potential. They are also changing with acquisitions and financings so quickly that 6 month old financials are too old. It is certainly a growth story. Projecting to double their output by 2012. They have hedged about 70-80% of their gas production in 2010 at $9.15 ($8.59 for 2009) and they have sold/locked in over about $1.1B of oil revenue from 2010-2012. They are doing some things conservatively but many things aggressively.
They have diluted a lot. They have added a lot of debt. They will be cash flow negative for 2010 and 2011 with 2012 turning cash flow positive with the Century Plant fully contributing at that point. Even Tom Ward had to sell $50M of SD at the bottom in the mid $5. range (margin call?).
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aw you guys are making me work. I will look into it this weekend. When something is trading at a $1 and people are saying they wouldn't sell for less than $10 its tough not to get interested.
I found their AIF the best summary of their business. If my memory serves me correctly, they have spent somewhere in the neighborhood of >$750M to buy up these assets and create SFK. Market value of 90m units x $1. = $90M + ($150 LT Debt + $50M in debentures)
http://www.sfk.ca/EN/docs/NA/20081231_Annual_Information_Form_.pdf
It is certainly difficult looking at their 2008 numbers and trying to figure out how this company can have normalized earnings that justify a $500M ($5 per unit) market valuation, let alone ($10/unit) $1B !!! If you look back to 2006 and 2007 where they had EBITDA of $40-60M, you can see that the potential is there. If you start to consider the assets and low relative debt, there certainly seems like there is a lot more value than $100-200M there, especially with the $750M+ that they have invested in the 3 mills. I would have to assume that as a whole, investors have to be considering whether the demand destruction is permanent or temporary. If the demand for pulp is permanently reduced, than the worst case scenario is that their assets are worth way less (ie. 50% less?) than what they paid for them. How valuable are assets that, regardless of how efficient of a business you have, you can't even make 1-2% margins when they used to be making in excess of 10% margins. Are 5-10% margins possible? Are the assets valuable enough that in a liquidation/sale of the company, can they fetch $300M net of all costs associated with such a sale? $300M would provide $200M for debt/debentures plus $1. per common shareholder and wouldn't put any value on the business. That is my quick take but more recently, they have a black liquor subsidy issue, revenue from selling power back to Quebec, Cdn/US$ currency issues as well as a significant increase in the pricing of NBSK in the past few months.
Can the value destruction here be almost entirely traced back to the rapid fall in the NBSK pricing, NBSK demand/supply issue and the US$ currency issues?
I do own shares but I am still in the process of narrowing down what a reasonable valuation is. More than my $0.65 cost. Maybe between $2 and $5. as an estimate ;) It would seem that $500M seems like a lot for a company that is in a very fragile industry. It would be frustrating to be in an industry where the vast majority of your success or failure depends on several things that are totally out of your control. I would narrow it down to this as to why I don't have a larger position here, as well as my inability to confidently see absolute value.
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I thought FFH was part of every deal happening in Canada in the past 24 months? Where are they here? ;)
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I stumbled upon this company last week. Mark sellers is a value investor who is chairman and owns over half of the company. It is in the process of a turnaround after replacing the previous management. They own the rights to the titanic assets which is supposely worth at least a 100 million. The current market cap is roughly 60 million. They are in court fighting for the right to sell the assets. The company has no long term debt and 10 million in cash. any opinions?
Premier Exhibitions does the "Bodies" exhibits, seemingly educational, but when you dig deeper, you'll learn that their founder was run out of Germany because of Nazi ties and doubts about where he got the bodies. He got a peirmit to bring his subsequent exhibit to the US, but these bodies now seem to have come from an area of China where the government had a prison where disidents were kept. One of the bodies in the exhibit a few years ago apparently had a bullet hole in the back of the head.
In my opinion, everyone associated with this co deserves to go to the place they richly deserve to be.
One of the investment newsletters I read did a write up on it. It seemed somewhat interesting but I didn't do any personal digging into the investment idea, however I did not expect the input that I read above. Interesting. Some of the best opportunities I have passed up in my life where because of something I didn't agree with. I look back and wonder whether or not I let me emotions dictate the decision to avoid a certain investment idea.
Along similar lines, BeerBaron recently commented that he bought easyhome. They are a company who lease products to people who don't want to or (but more likely) can't afford to pay for them up front and we aren't talking about a car or your house (aka wants not needs). Admittedly, I haven't done any research on the company but my first (emotional) reaction revolves around the notion that a lot of our world's financial problems stem from people wanting and buying things they can't really afford and that companies similar to easyhome contribute to the problem. I don't want to look any further into the company because of my initial reaction. Is this irrational? Is it irrational to exclude an investment idea because a former owner (I assume it was a previous owner) has a dubious past?
FBK
in Fairfax Financial
Posted
Why buy 50,000 rights when you can buy the shares at $1.01 or $1.02 or $1.03 in the open market? In the past their hasn't been the volume or that price but today there was. Perhaps the $1.01 trade isn't guaranteed to occur but the $1.01 price is guaranteed if you buy the rights (I bought more rights the other day too)? But you had to pay something for the rights, so that would make the $1.02 reasonable. At $1.05 or more, the rights make a lot more sense to go through the process but below that, I have come to the conclusion that if I want more shares, I might as well just buy the common shares. If you want a larger volume than the rights seem to be the way to go without moving the market.
The next 2-3 earnings reports should be interesting to see how the market starts to value Fibrek as a going concern and not a lifeless company that earns just enough to pay their employees leaving nothing for shareholders. In hindsight, that certainly explains why executive management and board members own virtually no shares of FBK. For the life of me, I can't see how the CEO of a company that earns almost $500k per year, gets $40k/yr in a housing allowance, $17k/yr taxable benefit for a car, plus stock grants and pension benefits hasn't used $50k or $100k of his own money to buy stock. His house and car are paid for so his disposable monthly income should be generous. Everyone is different and has unique circumstances but the same goes for each and every board member. Those all go in the negative column when adding things up for FBK.
I am voting to cease talking about the Rights Offering as of midnight tonight and then starting a new thread, still under Fairfax, about future earnings, valuation, etc. regarding FBK.
Question : Was it only the people on this Board that independently pushed the price of SFK/FBK above the $1.25 to the $1.99 level? It certainly feels that way sometimes.