Canfor Pulp Products (CFX-T)

CFX has been on a steady downtrend. Revenue has been in decline over the last two years, free cash flow has gone negative and it has been operating at a net loss since 2019. Debt has been increasing as well and net debt is now at $87.4M. The industry is quite cyclical so in an upturn, CFX will do better. It is tough to be patient here and fundmentals have meaningully deteriorated over the years while the company has not done a good job in creating shareholder value historically. We are comforable letting go of this one. 
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A name to consider over the next 3-5 years. Overall, an interesting place to be looking, though stocks have been hit so much since the pandemic heyday. Governments are pushing new home builds, and that should help prop up the market. The renovation market will be impeded by people's ability to spend.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.

Re: upcoming mil closures: The closing is expected by 1Q end, but costs may slip into Q2 depending on exact timing of layoffs. Other than severance, a lot of costs will be non-cash. CFX has about 1,300 employees, so close to 25% are being impacted. The charge could be $20M+, but that is still not hugely material compared with average cash flow. 
With its small size, weak liquidity, no dividend and cyclicality, we do think there are better names to look at. 
It also has not created much shareholder value in its existence.  Unlock Premium - Try 5i Free

Seasonally, forest product stocks have a history of reaching a peak around the 3^rd week in April. This year is no different. Probably an opportunity to take some money off table.

CFP-T vs. CFX-T. CFP-T has more leverage to building products. He prefers it over CFX-T. He does not invest in pulp.

(A Top Pick April 22/14. Up 36.7%.) One of the largest softwood pulp producers globally. It is a play on the growing middle class of India and China. Benefiting from a weak Cdn$. Have a strong balance sheet with net cash. Expecting they are going to generate $1.50-$2 in free cash flow, which will lead to all kinds of opportunities for them.

A large producer of softwood pulp in North America which goes into producing things like tissue paper, etc. Benefiting from current strong pulp prices and a weak Cdn$. Thinks it is going to generate a very significant amount of free cash flow over the next couple of years, in excess of $1 a share. Yield of 1.86% and there is a very strong possibility that this will be increased significantly over the next 12-18 months.

This one can be traded. On May 22/13 to June 24/13 there was a dip in the stock price. Pulp is cyclical. If there is any kind of questionable growth or volatility in the market, you will see this one suffer a little bit of a downdraft.

Just reinstated their dividend last quarter because results have been better on the pulp side. Clearly the dividend will be able to grow. Also, could be a takeout candidate by Canfor Corp (CFP-T), their parent.

Doesn’t think they look for too much out of the pulp side of the business. It’s mainly lumber. If you are going to play anything in this area he would prefer you do Canfor (CFP-T) directly.

This one has been basing on the price chart for the last little while. Market seems to be hardening up a little bit for pulp prices. Thinks this one can probably go higher over the next couple of months. Wouldn’t be hard to see $13-$14 on this.

Had a wonderful run from 2010 up to about $18 but unfortunately it turned around and now is in a major downtrend. Not making any kind of a base.

Producer of an industrial product and Chinese dictate demand. Price is whacked. You might want to lock in any capital losses.

There is a big price war so margins keep coming down. In the last week or so, inventories have come down a little bit so there has been a slight pause. He finds value elsewhere.