SFK pulp

[Guest Dazel]

 

 

SD,

 

It looks like the market is just starting to figure out what you have been saying...Congrats. Hopefully it is just the start up a "return to the mean" which Prem Watsa called a couple of years ago. It would be nice to see that Fairfax averaged down like the rest of us!

 

Dazel.

[Uccmal]

I started rebuying stock in sfk.un about a month ago.  My average pp is 0.40.  I have now made more on this stock than I have ever lost and it was my worst all time loser to date. 

 

I still dont think that much of the business but it should allow for a 5 bagger at least. 

 

Humbly yours.... A.

[Guest Dazel]

 

 

PULP prices are once again up across the board for the week of Oct 6. They are at 779.79 up $20 over last week...there was no bid for pulp in the spring as companies liquidated. It would be nice to hear from sfk on the price effect on their business.

 

Dazel.

[FFHWatcher]

that sounds like a sell signal if I've ever heard one  ;)

 

If you were wrong the first time, what's changed that makes you certain that it will make you money this time?  You aren't suggesting a 50% gain but a 500% gain.  

 

disclosure : I did a similar thing as you. Bought it, sold it at a small loss and then bought back and went on to show a 40% loss, I averaged down a lot and am now showing a 20% profit....on paper.  I will be the first one to tell you that I am not capable of reasonably determining whether they eventually default.  

[Uccmal]

FFHWatcher,  There is really no way to know at this point if they will default.  This is a basic Graham/Watsa play.  If they survive the stock will go up a great deal.  If not, I have a few other similar smallish positions.  Some of them are going to work out. 

 

At this point survival looks to be better, anecdotally, than it did last year at this time. 

 

 

 

 

[SharperDingaan]

 

Just keep in mind that there's an awful lot of rocket fuel sitting on the pad; so when it lights, a lot of good things are highly likely to happen very quickly.

 

The trick(s) are going to be (1) not getting ahead of oneself, & (2) managing ones greed. Both items being something that we don't have a lot of experience with.

 

Always willing to learn though  ;D

 

SD

 

[alertmeipp]

almost up to 1 buck now. Lighten up my load today. Bot too little at 20 cents and didn't add during the run.

:(

[Guest Dazel]

 

 

pulp prices were up again today for the week...quite a run in pulp pricing!

 

SD,

 

It looks like we are getting the going concern evaluation we discussed. Any thoughts on forward thinking...4th quarter in particular.

 

Dazel.

[SharperDingaan]

 

Need to see the Q3 numbers, but we think its an non-issue.

 

Given the $1 minimum for most institutions; in the current climate its probably pretty hard to convince an IC, with not much more than analysis & choppy trading around the $1 mark. Conservatism dictates a wait & see approach.

 

Re Q4, we're assuming an average 5% higher price, & a 5% drop in the $CAD. Q4 earnings at about 85% of Q3. Gives some room for higher fuel costs & the odd adverse surprize.

 

Per the forecasts, the discount seems to be about 40% ((.5-.3)/.5). Once Q3 numbers are out we'd expect it to roughly halve.

 

Back of the envelope. 40c/yr x 5.

 

SD 

[oldye]

The higher pulp prices weren't there for all of Q3...just going by memory but it wasn't till the end of August that they started to make money.  Assuming prices don't collapse, Q4 will be much better than Q3.  Not that it matters

[Guest Dazel]

 

http://finance.yahoo.com/news/Canfor-Pulp-Income-Fund-ccn-2889615066.html?x=0&.v=1

 

Canfor pulp"s results were very solid. They are pricing $830 per ton for November Pulp. These are excellent prices.

 

Dazel.

[UhuruPeak]

 

 

For the next 2-3 months we can probably expect all kinds of pleasant surprizes.

 

Purely speculation,

 

At some point there will be the black liquor subsidy announcement. Assuming their share is roughly 3x the St Felicien maintainance capex -about a 15c/share increase.

 

Its highly likely that they are again profitable. We think they are actually a lot more profitable than most people realize as both the sales price & throughput volume have (probably) gone the right way - & significantly. When we see the numbers, it should be quite obvious. Maybe a 30-50c/share increase.

 

Its highly likely that they are building a mountain of cash, from both operations & the interest payment relief. For now they're probably building the stash, but during Q4 we half expect to hear of open market debenture purchases - especially if the subsidy has also been announced. Another 20-30c/share 

 

Somewhere around $1.10 to $1.40/share by mid Feb next year.

 

SD

 

 

 

One word... "WOW!" :)

[oldye]

http://www.paperage.com/2010news/02_19_2010sodra_price.html

Sodra announcing further softwood increase to 890$/ton. 

 

Cheers!

[Uccmal]

of interest:

 

 

Canfor Pulp yield expected to rise

Posted: February 22, 2010, 10:40 AM by David Pett

distributions, Canfor Pulp Income Fund, Market Call, pulp

Canfor Pulp Fund's current yield of 14.8% looks safe after pulp producers raised prices on northern bleach software kraft (NBSK) pulp. Even better, the company's distributable cash is only going to get bigger, says Daryl Swetlishoff, Raymond James analyst.

 

"Given current pulp markets we not only view [the current] distribution level as sustainable but see upside," he said in a note to clients.

 

Canfor Pulp's current yield of 12¢ per month or $1.44 per year represents a 66% payout ratio based on a NBSK price of US$850 per metric tonne and a loonie at US95¢.

 

Mr. Swetlishoff said Canfor has historically paid out at a 90% ratio, implying a 20% yield or $2.17 per year dividend. But he estimated that the distribution could go even higher.

 

"Canfor maintains high leverage to NBSK pricing and we highlight that at current spot pulp [of US$880 - US$910/mt] and FX rates our model forecasts Canfor generating $2.75 - $3.29 in annual distributable cash implying 28% - 34% annualized yields," he said.

 

The analyst raised his rating on Canfor Pulp to Strong Buy from Outperform and increased his price target to $12.50 from $11.50 per share.

 

 

 

Read more: http://network.nationalpost.com/NP/blogs/tradingdesk/archive/2010/02/22/canfor-pulp-yield-expected-to-rise.aspx#ixzz0gMtRvxkU

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[FFHWatcher]

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 :)

[cwericb]

.. and on the subject of Dundee's fearless predictions Google alerts just put this out ...  "FEBRUARY 23, 2010, 7:58 A.M. ET. SFK Pulp Target Raised To C$1 From C$0.50 By Dundee"

[oldye]

.. and on the subject of Dundee's fearless predictions Google alerts just put this out ...  "FEBRUARY 23, 2010, 7:58 A.M. ET. SFK Pulp Target Raised To C$1 From C$0.50 By Dundee"

 

That is how it works, once a stock runs up analysts upgrade.  After the stock crashes they downgrade. Probably wouldn't be that bad of a job if you didn't have to look yourself in the mirror once in a while. 

[cwericb]

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.

[Uccmal]

I would suggest that there are a number of members of this board that could get an analysts job at Dundee.

 

cwericb, Now that really wasn't a very nice thing to say.  :P

[Guest Dazel]

 

Warren Buffett had a line that I always think of when analysts give targets.

 

When asked about analyst reports...He replied when I am looking at making investments why would I look at the "funny papers".

 

Dazel.

[Guest Dazel]

 

I will be very interested to hear from Sfk tomorrow.  With 2009 behind the pulp producers it looks like those that survived will prosper. I will be looking more at their language for 2010 than last years results. A couple of recaps from SD who has a better handle on this than anyone I have seen.

-did they buy back some of the debentures at depressed levels?

-how did their new initiative work on the workforce?

-What the US operations look like for 2010 after the US subsidy is gone for their competitors?

-what the future revenue stream looks like from their green initiatives?

 

What does 2010 look like not 2009...

 

Dazel.

[Cardboard]

I did switch from CFX.UN to SFK.UN in December after seeing a very large change in risk/reward between the two. I think that we are still at very attractive ratios today. And, if we are to see a $5 stock price on SFK.UN under a scenario as described by SD, then it will be close to paradise.  :P

 

The only question mark that I have at this point with SFK.UN is the performance of their U.S. mills. Wastepaper cost has gone up dramatically in the past year, while RBK pulp tends to follow the pricing of hardwood pulp (BHK). BHK is about $100 a ton cheaper than NBSK (and always cheaper), but it is up a lot as well from the low. Looking forward to see their margins there.

 

Nonetheless, I believe that $2 a share is a very achievable target near term. It's really a story about the improvements being there already to see, but the stock price has a lot of catch up to do. What I also really like about SFK is that they did not dilute their shareholders during the downturn. They did not panic, ran a tight ship and now reward is just ahead for their shareholders.

 

Cardboard

[UhuruPeak]

I did switch from CFX.UN to SFK.UN in December after seeing a very large change in risk/reward between the two. I think that we are still at very attractive ratios today.

 

Nice timing, congratulations!

[Guest Dazel]

 

Great Cardboard! I was hoping that board members did this (we did not)! At $5 bucks I will be flying SD's family anywhere in the world they want! As he said $2 bucks is a forgone conclusion. If we remain at current pricing it is very possible that SD will hit his target this year.

It is my thinking that Canfor pulp would see this and take it out at $2.50 or so...

 

My question to you Cardboard ...Would you take Canfor pulp shares back for your SFK shares at $2.50? If not what price?

 

Dazel.

[Myth465]

I feel like im missing all the actions. Im hoping the earnings release doesnt move it too much. Its been moving upward fairly regularly over the last 2 weeks. Feels like ATSG at $1.