Opinions
Michael Underhill
Western Forest Products Inc.
WEF-T
BUY
Sep 17, 2013
Stock price when the opinion was issued
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Premium contentPremium contentPremium contentOur view remains unchanged. The only recent news was that WEF had engaged in a partnership with a First Nations group where the Group would acquire a 34% interest from WEF in a limited partnership, for $35.9M. There is nothing exciting fundementally and it has small cap risks, so we continue to view it unfavourably.
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Some insider buying. Trades at 0.16x sales, about half as much as CFP or IFP. Money-losing right now. Specialty wood products, typically higher margin and more profitable. But not anymore, related to housing market being slow. Cut dividend to protect balance sheet, so company's now pretty secure.
A great turnaround stock with upside once US interest rates come down and housing activity starts to come back. He's keeping a close eye on it.
WEF has rallied with interest rates, which help the sector, but is still down 26% for the year and 37% over 52 weeks. Note the dividend was cancelled in November 2023 and none is paid currently. This week WEF announced it would be cutting production. It is still losing money. With its losses and outlook and omitted dividend and small size we would continue to be not interested here.
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With a company like this, that is restructuring itself, and to have a yield is going to attract more capital. Question is, is it going to be more sustainable institutional capital. Short-term, we’ll see. Longer-term it is a very interesting company. The fact that it pays a dividend now and has a dividend payout ratio that is appropriate and prudent, between 30%-60%, absolutely.