New FBK

[cwericb]

Anyone expecting anything interesting in the next report or has everyone bailed and gone elsewhere? I keep telling myself that patience is a virtue, but I have a fair amount tied up here and while I have conceded that I'm in it for the long run, I'm just not sure how long that will be.

[triedtestedand]

cwericb:

 

Incrementalism is the song sheet I'm working off of for FBK, trusting that their balance sheet continues to solidify and simplify over time.  With the debentures now history, continued EBITA of 10M+ per quarter will pay off revolving credit line ... so by the end of this quarter, their (account receivables + inventory) should roughly equal their (accounts payables + long-term-debut), which will make the company much simpler to analyze/value.  I trust they will continue to make steps to get their RBK business more profitable, keep cash coming in on the NBSK business line, and keep allocating such cash wisely. 

 

My worry is that of other board members ... that the next commodity downturn comes sooner than later ... but that is outside management's control, and in the past 18 months I've had a few gripes, but overall I've been quite satisfied with how management has been able to knock down various pins.

[Uccmal]

I am still holding a 6% position or so in fbk.  The creeping incrementalism with which they are paying down debt may allow us to buy more at low prices while things continue to improve.  Management is doing the right things so far. 

 

My two worries are:

1) the commodity price

2) management doing something stupid with the cash. 

3) 1&2 at the same time.

 

There is alot of competition for my investment dollar right now.  Many growing companies are paying dividends in excess of 4.5% such as SSW, MTL, SLF. 

[finetrader]

Still a 14% position.

 

few good things coming:

 

-turbo generator

-possibility of dividend next year?

-new arrangement with customer for RBK

 

risk:

-NBSK price to soften

-CAD appreciation (been correlated to NBSK price lately)

-Wastepaper price is increasing ( i'm afraid that RBk' s side will loose money in Q2)

 

 

[cwericb]

I was a lot more sceptical of management a couple of years ago than I am today and they have made some good moves recently. The union agreement has been signed, the debentures have been retired and the cost plus agreement on 50% of RBK production gives those plants some much needed stability. Hopefully they will soon be able to have most of their RBK production contracted on a cost plus basis which should finally remove that drag on the company. I also am waiting to see how they fared with the FDA on the use of RBK in food packaging. So they do seem to be making some good moves, I just hope that they don’t get over ambitious in other areas.

 

And by the way, quite some time ago I came to the conclusion that FBK management does read what we say here so if I am right - keep up the good work and let’s make some money!

 

As for pulp prices, I guess we just have to keep our fingers crossed. But in comparison to the situation a couple of years ago prices certainly have stabilized and look pretty good at this level.

 

FBK probably represents (depending how you look at it) about 8% of my portfolio  - today. It fluctuates so widely this can change pretty quickly. I originally bought in at about $1.72 three or four years ago, but have averaged down to around $0.85 so I can’t really complain.

 

Guess we will know more in a month’s time when the Q2 numbers come out, but It would be nice if sometime a report containing some really good news and numbers.

 

[SharperDingaan]

 

Keep in mind:

 

1) What needs to happen for a double to 2.70 ? Is it realistic, what is the time-frame, etc. Most would argue that it is when, not if - 100% ROI if its 1yr, a 36% [72/2] ROI if its 2 yrs, & high probability.

2) What needs to happen to double again to 5.20 ? Most would argue that this is hazy - lots of possibilities, very high ROI, but much lower probability.

3) What happens the sooner results start to show ? Most would argue improving EBITA, AND a higher multiple. The less time taken, the higher the ROI, & the greater the momentum pushing the EBITA multiple up - & raising the ROI still further. A virtuous circle.

 

It is highly likely that management does read this board, & are well aware that patience is limited & that failure will result in asset sales - not a bad thing. They will also be acutely aware that without FFH's graces they wouldn't have this 2nd chance.

 

There is still risk, but most of the FBK specific risk would seem to be behind us. Today, the main risk is probably the selling down of a high portfolio weighting too early.

 

SD

 

[SharperDingaan]

 

Assume a 25% weighting to FBK, & a double in 1 yr.

 

If nothing else happened, the change in the price of FBK will increase the value of the portfolio 25% [25%+25%+25%+25%x2] = 125%/100% = 25% potfolio increase .... but if you had reduced your FBK weighting by 50%, the change in the price of FBK will now increase the value of the portfolio by only 12.5% [37.5%+25%+25%+12.5%x2] = 112.5%/100% = 12.5% potfolio increase.

 

And if FBK doubled in 2 yrs vs 1 ? ....  the portfolio would increase by 12.5% & 6.75% respectively

 

Point(s)

(1) Without a very sizeable portfolio weighting to FBK, the effect on overall results is minimal

(2) If you have a sizeable weighting, your primary concern is the day-to-day liquidity - not the return on the portfolio.

 

SD 

 

[alertmeipp]

CFX again posted some solid result. The amount of cash they are giving + the share price appreciation make us FBK bagholders look kind of ...

 

http://www.digitaljournal.com/pr/370143

[cwericb]

Frustrating as hell watching the share price erode day after day.

 

Used to be the price would run up wildly before reports were released, then after the release the bottom would fall out. Perhaps this time it will be the opposite. This is me trying to be an optomist.  :)

[T-bone1]

someone is dumping a lot of shares this morning, trading as low as C$1.02 and already 430,000 shares traded . . .

[gordoffh]

This is disconcerting. Going into results dropping like a stone . Have been nibbling since mid 1 twenties. Still a Sizable holding. Offset by pd,tdg and sd however if this one ever took off on to the races. Sure is reacting much differently going into this quarter results. Anyone else buying?

[cwericb]

When you see something like this you have to wonder if someone knows something we don't?

[gordoffh]

You got that right

[rmitz]

When you see something like this you have to wonder if someone knows something we don't?

 

Agreed.  On the other hand I have seen cases where companies go down significantly before results then come back with amazing results, so it's somewhat hard to tell.

[finetrader]

Fallen NBSK price combined with CAD appreciation are not conditions for FBK to make the most of it

[SharperDingaan]

(2) If you have a sizeable weighting, your primary concern is the day-to-day liquidity - not the return on the portfolio.

 

Most people would be hedging this in the current climate

 

SD

[cwericb]

MONTREAL, July 25, 2011 /CNW Telbec/ - Fibrek (TSX: FBK) will release its 2011 second quarter results after market hours on Wednesday, August 3, 2011. President and Chief Executive Officer, Pierre Gabriel Côté, and Patsie Ducharme, Vice President and Chief Financial Officer, will host a conference call on Thursday, August 4, 2011 at 10:00 a.m. (Eastern Time) to discuss financial results. Members of the financial community will be able to access the conference call and ask questions.

[Uccmal]

Well, pulp prices are mostly unchanged as far as FBK is concerned.  I dont imagine they are getting the FOEX listed price so I doubt that the slight price drop has affected their income at all.  Should still be good.  The currency is a concern, but likely only temporary (currency was similar last summer).  We are hitting an extreme due to the Washington circus. 

 

So that leaves what:

- FBK with less total debt (no debentures anymore) and positive cash flow

- unchanged situation with US plants which dont worry about exchange rate.

- pulp price somewhat higher in Q2 than Q1, than Q4 etc - stable at the moment.

- debt dropping daily

 

I bought 5000 shares today at a price way below what I paid last summer (1.00)  in comparison to what I am getting today.

 

 

[cwericb]

Pulp prices have only softened about 1% yet are still at a higher than at any time prior to the first of June. While the Canadian dollar has been bouncing around due to the US fiasco, up until now has been reasonably stable. So all in all, not much has really changed since the first of the Summer.

 

HOWEVER, for most of April and May the share price was nearly 50% higher than it is today running in the $1.50-1.60 range. So are investors just getting impatient and looking for greener pastures? I just have this uncomfortable feeling that management might be thinking of something that they see as a good long term move, while investors aren't prepared to wait around.

 

I might consider buying more at this level but I probably have enough irons in this fire already.

[Hoodlum]

NBSK pricing in China has dropped 7% in the past month.  Not sure if this will impact NA pricing in the coming weeks.

 

http://www.paperage.com/foex/pulp_china.html

 

[cwericb]

At least if nothing else a 3 cent rise was welcome on a day the TSX was down 268 points.

[tyska]

At least if nothing else a 3 cent rise was welcome on a day the TSX was down 268 points.

 

Sadly the only thing I own that went up today. FFh sure took a drop for a bit there also.

[lessthaniv]

The Tembec press release (q2) communicates their opinion that the softening in NBSK at the moment will be followed by firming prices in later part of the year as industry conditions remain favorable for producers.

 

 

[Uccmal]

I have nearly sold completely out of fbk.  About a 90% reduction in total holdings.  My primary reason's are the following:

1) there have been many better values available than fbk offers - i.e. SSW below $13 with a 6% and growing dividend.

2) this is beginning to feel like a long term water treader.  Indications are that pulp prices are on the downswing again.  I expect Fibrek will get by okay but I am no longer expecting gains of any significance at this time.

3)  I dont ever see them getting the stock price up again when cfx pays a 10% yield and is awash in cash.

 

I took roughly a 10% loss on my recent sells.  However, In aggregate I was way up this time around (since 09) because I bought alot when it was much cheaper than today.  This is not so much a bashing of fibrek as what I have stated in number 1). 

 

Management is doing the best they can as far as I can tell but they are battling numerous headwinds dealt to them earlier in the 2000s the major one being the US plants.  When I see them actually building their energy plant, and stabilizing their US pricing I will revisit.  My feeling is there will be plenty of time to change my mind in the fall or winter coming up if I choose.

[cwericb]

Does anyone see this going anywhere in the near future? Trading volume has dwindled to a trickle, NBSK price is slipping and I'm thinking of joining Uccmal and dumping a good portion of this because it just seems that there are a lot of better values out there. I think that there is potential here but it is beginning to look like that is a long way off.