Nnejad Posted November 12, 2011 Share Posted November 12, 2011 Here's one problem with the "let's separate the power from the pulp business" idea - the energy business relies on the pulp business continuing to operate. No pulp business, no energy revenue. Link to comment Share on other sites More sharing options...
FFHWatcher Posted November 12, 2011 Share Posted November 12, 2011 Here's one problem with the "let's separate the power from the pulp business" idea - the energy business relies on the pulp business continuing to operate. No pulp business, no energy revenue. Where was that said? Link to comment Share on other sites More sharing options...
Nnejad Posted November 13, 2011 Share Posted November 13, 2011 Generally, a vast majority of the energy created at kraft pulp mills is a result of burning black liquor, which results from the kraft pulp-making process. My gut instinct is to say that the increased capacity in this case is also tied to this, especially given the margins; yet i guess it is possible these are wood-burning generators. Link to comment Share on other sites More sharing options...
Uccmal Posted November 13, 2011 Share Posted November 13, 2011 Either/or, probably need some Black Liquor, or nat. Gas to keep wood burning. Fbk is not cheap enough for me. Would but below 0.40, perhaps. Have been buying cfx, since it pays the 14%dividend. Market is probably pricing a 40% cut which should be the maximum. Merc looking better than fbk as well. Link to comment Share on other sites More sharing options...
alertmeipp Posted November 13, 2011 Share Posted November 13, 2011 the funny thing is FBK could afford even more divi than CFX but choose to not to. They want debt free or what? Whether it's cheap or not depends on what you think about the RBK turnaround. At 40c, market cap is 48millions, EV = 130m.. cash flow >40m. Hope it doesn't get to be that cheap. MERC has more leverage (although as some posters point out, its power revenue covers it well). Link to comment Share on other sites More sharing options...
SharperDingaan Posted November 13, 2011 Share Posted November 13, 2011 If you think FBK will see IV in 3 yrs, the compound return is above 40%/yr – but you essentially see FBK as akin to a zero-coupon bond maturing at 100. We think IV realization is conditional (share consolidation, merger), but given the type of institutional ownership - reasonably likely. To get 40%+/yr this has to be a pretty special business. We think it is. They hold a dominant portion of the RBK market, & have a significant new product in that market at the beginning of its life cycle. They have a profitable NBSK operation, which will have a material portion of its EBITDA hedged against an independent income within 12-18 months. They have very little debt, free cash flow, & the ability to grow EBITDA at more than 36% - by simply repurchasing shares that nobody wants. They are indeed pretty special. Most folks will not pay $1 today, for $2.50 - 3 or more years out (in spite of it being a 40c dollar). To get the Greenblatt 30% return experience, you have to be 75% confident that you will actually see IV realization within 3 years. SD Link to comment Share on other sites More sharing options...
Uccmal Posted November 13, 2011 Share Posted November 13, 2011 I think part of my problem is that this company has always looked like a good deal and has never actually been a good deal. It has for the six years that I have known it been a brutal value trap. I got out of the last round with my skin intact. On the opposite side of the equation is cfx which I have easily tripled my money on over 2.5 years, distributions included. We are in an apparent down cycle in pulp. CFX and MERc are insulated right now. I dont have the same confidence with fbk. If I am wrong I am wrong, so be it. As per Greenblatt's supposed returns. He made them using Leaps, and other options, not holding the likes of fbk. I bought BBY leaps when the stock was around 24 a few weeks ago and have done very well, and expect to make at least a 5x return on those. FBK (may) give me return of 2.5 x max over 3 years. Link to comment Share on other sites More sharing options...
SharperDingaan Posted November 14, 2011 Share Posted November 14, 2011 Agreed re Greenblatt. But assuming no real change in share price until IV is realized - there’s not much difference. Nice thing with the equity though is that the timeframe is open-ended, & buybacks (speculation) tend to increase both floor price & liquidity. You may get an opportunity loss, but you’re unlikely to lose on the actual investment itself. Obviously, not for everyone. SD Link to comment Share on other sites More sharing options...
lessthaniv Posted November 14, 2011 Share Posted November 14, 2011 If you think FBK will see IV in 3 yrs, the compound return is above 40%/yr ..... Most folks will not pay $1 today, for $2.50 - 3 or more years out (in spite of it being a 40c dollar). To get the Greenblatt 30% return experience, you have to be 75% confident that you will actually see IV realization within 3 years. SD SD, Most folks, including their largest shareholder have been holding for much longer than 3 years and will likely lose money with an IV of $2.50. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now