CFF is currently trading for $6.24 per share with 26.44 million shares outstanding and a market cap of $165 million. Including CFF's net debt position of $145.63 million, CFF has an enterprise value today of only $310.63 million - when the company reported 2017 full year revenue of $469.7 million and was extremely profitable - with positive EBITDA of $46 million!
CFF's revenues and profits came from three major operations in Canada: its Fort St James Sawmill with 310 million board feet of annual lumber capacity, its Mackenzie Sawmill with 215 million board feet of annual lumber capacity, and its Mackenzie Power Plant a 36MW biomass power plant that currently produces clean energy for 20,000 homes in Canada using the residuals from its Mackenzie Sawmill - ensuring a 100% utilization of all wood fiber!
In 2018, CFF's total sawmill capacity will increase by 180 million board feet or 34.28% to 705 million board feet - with CFF currently preparing to commence commercial operations at its El Dorado, Arkansas sawmill! CFF acquired the idled El Dorado sawmill in 2015 and spent nearly $80 million last year modernizing it - while hiring 120 full-time employees! When CFF announced its plans for the El Dorado sawmill one year ago, Arkansas Governor Asa Hutchinson (one of America's top three most popular governors), tweeted his support for the project and attended CFF's press conference.
Lumber at its current price of $522.20 per mbf is trading 30.22% above CFF's average lumber sales price for full-year 2017 of $401 per mbf. If we adjust CFF's full-year 2017 lumber revenue of $443.9 million for both a 30.22% increase in lumber prices as well as a 34.28% increase in production capacity - CFF's annualized lumber revenue is likely to reach $776.2 million by year-end 2018.
CFF's closest publicly traded lumber industry comparisons based in Canada are: Canfor (TSX: CFP), Interfor (TSX: IFP), and Western Forest Products (TSX: WEF). These three companies all have similar profit margins to CFF. They are all currently trading with enterprise value/revenue ratios of between 0.93 and 0.96 - with an average enterprise value/revenue ratio of 0.94.
NIA believes that CFF is likely to soon trade with an enterprise value/revenue ratio of 0.94 and based on current lumber prices along with CFF's total saw mill capacity including El Dorado - CFF will soon deserve to trade with an enterprise value of $729.63 million from its lumber segment alone.
Although CFF's bioenergy business is only generating annual revenue of $25.8 million, it has unbelievably huge EBITDA margins of 55%! In NIA's opinion, CFF's bioenergy business is worthy of an enterprise value equal to 5X revenue, which would value it at $129 million.
Therefore, CFF could soon see its total enterprise value reach $858.63 million. After subtracting CFF's net debt position of $145.63 million, this would give CFF a market cap of exactly $713 million. With 26.44 million shares outstanding, a market cap of $713 million would value CFF at $26.97 per share! CFF is currently trading for only $6.24 per share!
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