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Guest Dazel

 

wood chips have been a problem for SFK in the past...management said that wood chip prices actually were falling for the first time in a long time in the earnings report. This is a big deal...those that follow Canfor pulp know that they get wood chips very very cheap...this is part of a synergy that would make sense for a combination. Lumber is the top performing commodity in the world this year 2010....this is allowing for more production and cheaper wood chips...

NBSK prices were up again this week...should be a great quarter.

....as an enterprise it looks cheap to aquistion but the csahs they are pulling in now should give them more options.

 

we own a good chunk of SFK...and have not sold a share into this strength. I bought it personally at .21 and sold at .99 in October...the fundamentals were nowhere near where they are now....I wish I still had the shares!!! Pulp prices have been up every week since then!

 

Dazel.

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Canfor doesn't have any permanent advantages over SFK,  they're on the West where woodchips cost less due to the beetle infestation which allows them to enjoy a temporary competitive advantage.  It costs more than 20-30$ per ton to ship them east so I don't think about synergy, I think income trust investors want dividends and that explains the difference in market value.  

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Guest Dazel

 

Canfor the parent would be involved in our speculative thesis....Canfor pulp would use their shares (canfor pulp has almost 4 times sfk's market cap) and Canfor the parent would put up a portion of the cash to keep their 50% controlling stake in Canfor pulp. They have operations in Quebec so wood chips would be cheap to SFK if they were coming from the new parent Canfor.

I agree oldye that Canfor pulp's advantages are short term and that is why we think it is possible that they will take advantage of their situation...they could take in SFK merge it with Canfor pulp and sell off the two US mills to pay for it(over the next few years)...that makes it pretty much free...

W e think that SFK will do better without a takeover but it seems the market is giving Canfor or others an opportunity to steal SFK.

For giggles...Mackenzie used to own 20% of SFK...they own 20% of Canfor...and the whole sector could have lunch at one table...interesting times that were a long time coming.

 

Dazel.

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This is an average 12,250 ton per month at roughly 90% capacity (generous for a re-start) & most would suggest its highly likely that they will be displacing existing physical deliveries, against short forward contracts. Notable is that May-2010 (when this new production comes on line) is also when the European NBSK forward pricing curve peaks at 958 per ton.

 

If they have to delay, or cannot deliver in full, expect price spikes as they roll their contracts forward.

 

SD

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FWIW    From Stockhouse      Found it interesting  posted April 7th  disclosure  long

 

Hi SFK fellows !!!!

 

This stock is underevaluated. Let me give you the numbers for Q1. Thrust me, I have worked at the St-félicien mill for 2 years as a student and my father worked there for more than 30 years now (since the opening in 1978). I have discussed with him during Easter holiday at St-Félicien.

 

Note: those numbers and facts are only for the St-Félicien Mill

 

- Average Production was 1000 tons/day for almost everyday during the Q1 (lets say 28 days x 3 months) = 85 days x 1000 tons = 85 000 tons.

- Average sell price was around 900 $/ton (will easily reach 1000 $/ton this year according to him)

- Production Cost around 600 $/ton  = 300$ profit per ton x 85 000 tons = 25 500 000 $ profit for Q1.

 

This is without the inventory. Inventory was 70 000 tons last year during summer and are now less than 10 000 tons.  Storage places are almost empty, everything is sold. I suspect that they will had some profits from those sells in Q1 results.

 

The regular spring shutdown will be shortened to only 4 days to minimize the impact on production. The demand is too crazy.

 

Workers overther  expect the share price to reach 4 $-5$ by the end of the year. With the new compagny to be created (Fibrek Inc.)  management will obviously try to make the SP reach this level to offer some more shares on the market and raise money. The ultimate goal here is to by some sawmill and be self-sufficient in wood chips. Right now, they buy wood chips to Abitibi-Bowater at high prices.

 

Good luck

 

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Guest Dazel

 

wow.

That is a big increase in prices! I did not see that coming...Anyone know how many days of inventory are around?

 

SD..you are the expert here what do you see for quarter 1?

Can someone confirm they have shortened the shut down time in April to only 4 days. This is a smart move as they took time in December.

 

Dazel.

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We think it's highly likely that most of this is right. We know that global inventory has been at a record low, its the right decision to open the taps wide, & that demand has been escalating (which is why they can get hefty price increases). Average sell price seems a little aggressive.

 

What bothers us is that anyone trading with this information is effectively 'inside trading', so a trade made now could potentially be forcibly unwound. As it's also material, we would expect a trade halt, & a forced disclosure from management. Thereafter, a run up.

 

While we think the disclosure was 'honest error', there will probably be some consequence.

 

SD 

 

     

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I dont think that this is insider information as far as anyone here is concerned.

 

At this point it is more like unverified rumours.  

 

Any one of us could call the company and verify the status of inventory and pricing, or you could call one of their customers.

 

 

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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

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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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Classic insider trading is to use material non-public information to trade in the market.  It hurts shareholders, & is usually punishable by triple damages & the exchange unwinding the guilty party’s trades in Coy X. If you’re told the information in confidence, & act it on it for your own benefit, that is insider trading. If you simply overheard someone else & acted on it, it’s just fortuitous. This board just overheard the information, so there’s nothing illegal to trading on it.

 

A day has passed without a trading halt, & this information came to both this & the Stockhouse board at about the same time. As it’s highly likely that the bulk of SFK’s investors review these boards on a regular basis, this board has a lot of professionals on it - with the inside trading possibility being raised almost as soon as it hit the board, & there has been discussion with management (assumed); the market regulator has opted to let it pass. Essentially, no harm was done.

 

225000 shares traded yesterday, about 2x the last 5 days average volume/day.  NBSK has only been above $900/ton since Mar-09 (Paper Age), & it’s somewhat questionable if Saint-Felicien was actually producing at 96% of its 1040/ton/day capacity for the entire period. 

 

They probably have been going flat out, the Q1 results are most likely good, & employee enthusiasm around the restructuring, & the strong market is only to be expected; especially as many are most likely shareholders as well.  Hopefully, the protagonists will get off with just a stern warning.

 

Obviously, a very interest quarter coming up!

 

SD

 

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The Stockhouse posting was made in the evening of April 7th and I saw it the following morning.. That day I was wondering if the posting might have any impact on share price but on April 8th the stock actually dropped several cents to close at $1.26 so obviously there was no effect. However, when the same message was re-posted here yesterday, the stock priced jumped by over a dime, in fact up about 15 cents at one time. Coincidence?

 

The same person made another SFK posting yesterday and for everyone's interest here are the last three postings from Stockhouse

 

----------------------------------------------------------------

huge profit coming

thefrenchguy

4/7/2010 10:27:10 PM | | 99 reads | Post #28112661

Hi SFK fellows !!!!

 

This stock is underevaluated. Let me give you the numbers for Q1. Thrust me, I have worked at the St-félicien mill for 2 years as a student and my father worked there for more than 30 years now (since the opening in 1978). I have discussed with him during Easter holiday at St-Félicien.

 

Note: those numbers and facts are only for the St-Félicien Mill

 

- Average Production was 1000 tons/day for almost everyday during the Q1 (lets say 28 days x 3 months) = 85 days x 1000 tons = 85 000 tons.

- Average sell price was around 900 $/ton (will easily reach 1000 $/ton this year according to him)

- Production Cost around 600 $/ton = 300$ profit per ton x 85 000 tons = 25 500 000 $ profit for Q1.

 

This is without the inventory. Inventory was 70 000 tons last year during summer and are now less than 10 000 tons. Storage places are almost empty, everything is sold. I suspect that they will had some profits from those sells in Q1 results.

 

The regular spring shutdown will be shortened to only 4 days to minimize the impact on production. The demand is too crazy.

 

Workers overther expect the share price to reach 4 $-5$ by the end of the year. With the new compagny to be created (Fibrek Inc.) management will obviously try to make the SP reach this level to offer some more shares on the market and raise money. The ultimate goal here is to by some sawmill and be self-sufficient in wood chips. Right now, they buy wood chips to Abitibi-Bowater at high prices.

 

Good luck

--------------------------------------------------------

RE: huge profit coming

 

oddykog

4/13/2010 2:43:51 PM | | 51 reads | Post #28131479

I agree with you on mot of what you wrote. Possibly the target for the shares is a bit high, but I will settle for $3-4/share.

I think the recycled pulp mills in the US should also be doing well with their end product. What I don't know and will wait to find out is whether they are able to get enough recycled paper to keep those mills humming. Basically in the pulp industry at present you can sell all you can make.

 

-------------------------------------------------

RE: RE: huge profit coming

 

thefrenchguy

4/13/2010 9:35:07 PM | | 28 reads | Post #28132891

 

you're too, the US mill are doing great, in fact, I asked my father: Are those new mills profitable ?? He answered: Apparently that without them, year end results would have been worst than what they are. those USA mills saved SFK pulp.

 

They only black cloud for SFK is the contract with the union that is due for more than 1 year now.

But my father said that at LaTuque and at couple of other mills in Québec, they have obtained easy agrement with the union. SFK will probably base their offers on what has passed over there and hope for a positive respond. They cannot close St-Félicien mill (for a strike) with prices close to 1000 $/ton.

 

I accumulated big time since 2 week

 

Good luck

--------------------------------------------------

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Guest Dazel

SD,

 

It is excellent to see your ethics and the way you analyze a situation...including insider trading....For fun I had a look at the market activity

and pricjng of the SFK shares. The actual bump came on the release of the $940 per ton price for pulp this week. I have watched this number weekly

and I have stated here in the past it is amazing how much it has risen. So I like your thoughts but I think the market is looking at the pulp price

and not someone posting what could be non sense. The key to SFK is the price of Pulp...I have not seen it this high ever...not even when SFK traded in the $5

range.

The only item in the post that I would care about is the 4 day shut down...It has not happened yet so it would be tough to call it insider trading...That is what I would do so

it interests me to see how management are running things. They cannot control price but when you get pitches like $940 a ton...You have to do everythuing you can do to take advantage of it.

However, unlike the last many years we can look out a ways now with SFK as pricing is exceptional...the fears in the market were that it would drop down to the $700 level...I think would could agree that is ways off!

 

Things are getting interesting indeed.

 

Dazel

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Hi Myth,

  Do you have an Interactive Brokers Roth account? If so, don't you have to pay a lot in commissions especially for low priced stocks. I have been thinking of buying a lot of great gold/silver mining companies (trading on Venture/TSX) mostly priced in the sub dollar range. I would appreciate any suggestions to lower my transaction fees.

 

Thanks.

 

I bought more in my Roth Account. Was trying to buy last week Monday, but an ACAT transfer has cost me 10% considering this run-up.

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