Opinions
Michael Underhill
Western Forest Products Inc.
WEF-T
BUY
Oct 24, 2016
Stock price when the opinion was issued
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Our 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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It is a regulatory risk when you look at the softwood lumber agreement. You will see more softness in these stocks. Take a long look at prices and charts, but accumulate positions because they are not making any more trees.