Value Investing Tim Gramatovich, CIO at Gateway Credit Partners on Canadian energy sector |
- Tim Gramatovich, CIO at Gateway Credit Partners on Canadian energy sector
- Canfor Corporation (CFP.TO)
- Insurance Float and Deferred Acquisition Costs
- Events in Omaha on Saturday afternoon following Berkshire AGM
| Tim Gramatovich, CIO at Gateway Credit Partners on Canadian energy sector Posted: 26 Apr 2019 07:55 PM PDT |
| Posted: 26 Apr 2019 10:52 PM PDT Canfor Corporation is a Canadian softwood lumber and integrated forest products company. Its subsidiary, Canfor Pulp, manufactures kraft pulp and paper. It is active throughout North America, with lumber mills in British Columbia, Alberta, and the Southeastern United States. The company has a market cap of $1.7 billion, and revenues of $5.044 billion (ttm). Currently, Canfor trades at $13.87. My intrinsic value estimate ranges between $19.94 to $25.23. While the stock was trading at a third of my lowest intrinsic value estimate earlier this week when I first observed it, in the time following it appreciated slightly, and now only shows a 30% Margin of Safety. In my attempt to value Canfor, I computed an estimate of the company's owner's earnings to the firm. After carefully reviewing depreciation rates employed by the company, I decided that the depreciation figure provided was acceptable, and charged it against cash flows. Canfor's average five year owner's earnings yield to enterprise value is 14%, and its current earning's yield to enterprise value is 20.3%. The company has reported two owner's earnings deficits over the past decade, and an operating cash flow deficit in 2009. The ROIC has been spotty, however on average it has been satisfactory. Over the past decade, the average has been 8.48%, and over the past five years, 11.45%. The company does not pay a dividend, however it does repurchase shares (and has done so on a consistent basis since 2013). Canfor's seven year average EBIT cover its current interest charges 11.7 times. Its bonds, $408 million worth, are backed 62% by cash, and backed fully by working capital. Its bonds account for 23% of the company's capital structure. Its current ratio is 2.63, and its quick ratio is 1.01. The company has achieved satisfactory growth over the past decade--it is, however, facing headwinds due to oversupply in the lumber industry. Canfor is a decent quality company, which in my opinion is trading below a fair, conservative appraisal of its earnings power. The feedback on my previous analysis was helpful, and I look forward to more critiques. My chief concern regarding this analysis is as to whether I have mistaken what is a speculative enterprise--due to the volatility of its earnings--for a company of investment grade. Thanks you for taking the time to read my analysis and respond! [link] [comments]  |
| Insurance Float and Deferred Acquisition Costs Posted: 26 Apr 2019 09:10 AM PDT Can someone explain to me why deferred policy acquisition costs are netted out from liabilities in the float calculation? These are a capitalized intangible asset that gets amortized down through retained earnings, and replenished when new insurance policies are written. You net out reinsurance recoverables and premium receivables against the liabilities in the float calculation, which makes sense since that is money a company doesn't have and can't invest, but will get in the future. With deferred policy acquisition costs, that same logic doesn't apply. That isn't a receivable that a company will get at some point. I think it might be related to the fact that unearned premium is part of float, but can't fully wrap my head around it. Can anyone offer some insight? [link] [comments]  |
| Events in Omaha on Saturday afternoon following Berkshire AGM Posted: 26 Apr 2019 10:06 AM PDT Attending the Berkshire AGM next weekend for the first time and looking for suggestions for privately run events to attend in the afternoon following the meeting. Networking sessions, speaker panels, or any other types of get-togethers would be ideal. [link] [comments]  |
| You are subscribed to email updates from Value Investing. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States | |
No comments:
Post a Comment