Weyerhaeuser is a Timber REIT, whose price declined from $38.36 (June-12) to $20.8 (today). That is $13 Billion + decline on the market cap. Of course it is due to lumber price coming down. With 13.1 millon acre land and 6.5% yield, it looks like an opportunity. I just took the market cap nad debt and excluded everything else from the balances sheet and excluded all other operations, the land and the timber on those land seems to be valued roughly around $1700. I haven't done any due diligence, just a real quick 2 minutes look. I looked at this to see CTT price performance viz-a-viz other timer REIT. But that price looks cheap.
Here is an important point (at least in my opinion) to consider, unlike mall or even retail REIT's we are not facing systemic risk here, the risk here is cyclical and given the 50% decline in stock price (to match the 50% decline in lumber price) the cyclical risk is playing out and the further downside (which is always possible) is somewhat limited.
Hi Kingran, Here is an important point (at least in my opinion) to consider, unlike mall or even retail REIT's we are not facing systemic risk here, the risk here is cyclical and given the 50% decline in stock price (to match the 50% decline in lumber price) the cyclical risk is playing out and the further downside (which is always possible) is somewhat limited.Do they hedge for Forest Fire's or have an insurance policy? I am not even sure it would be possible for all the acreage they own.Andy
Do they hedge for Forest Fire's or have an insurance policy? Typically Timber companies don't take insurance policy against fire. The cost is high and the risk is low. Instead they manage their forests against fire. Besides fire other risks are floods, hurricane, infestation and lessor degree earthquakes. In recent storms 400 acres of CTT plantation was impacted.
WY is unique in their REIT CF accounting.It appears that the contract sale of timber and the sale of 'lump sum timber deeds' is not treated as ordinary income but is treated as a capital gain, where the trees are treated as real property. So this means despite the earnings shown, the IRS considers this the sale of investment property. This is recorded as operational revenue on the earnings and cash flow statement per GAAP, while disposition of the actual land for cash is recorded as cash flow from Investments (CFFI).Over the past 10Q they generated a total of ($MM) $2,709 in Operational Cash and from this paid $2,406 in common and preferred dividends. Thus WY over this period generated only $303 in operational cash after dividends. But investment assets over the same period were net sold down, generating $2,638...with most of this occurring in late 2016 and first two quarters of 2017. It seems most of this excess cash went to pay-down LT debt which went from about $12,500 to $8,800 with interest expense as a % of CFFO going from 37.6% to 24.2%, more in line with REITs this size. So there is no 'stable' series of quarters of 'normal' REIT investing activities to guage how well management is/isn't able to generate net cash flows that exceed distributions and can pay a significant portion of new CapEx.WY's CFs are tied both to the price of lumber and the quantity. As a single commodity company...with the exception of a small taxable subsidiary....WY's fortunes clearly are tied to demand for lumber, primarily for new home construction. The good news is there is no substitute and the trees aren't going anywhere. So like tobacco, the barrier to competition is high and demand will always exist. But unlike tobacco, there is no addiction and prices are elastic to demand. The other good news for those who buy primarily for the dividend, capital gains must be fully (not 90%) distributed unless the company gets into a cash flow crisis and needs the cash and so retains the capital gains and instead distributes a form 2439 (looks like a form W2) meaning the shareholder must report the 'phantom' CG income but then can take a 35% credit for the distribution. The other good news for those who hold WY in a taxable account is these dividends are the tax equivalent of Qualified Dividends and if they exist in the 12% tax bracket, will be taxed at 0% and 15% above that.This combines to probably make WY a good, albeit high income risk, dividend paying stock, currently yielding 6.4%.BruceM
LT debt which went from about $12,500 to $8,800Your debt numbers are incorrect. There total liabilities are $10,063, $9160 on 2016, and 2017 and LT debt are 6,329 and 5,930 respectively and $5924 as of last quarter and net debt (debt - cash) $5023.They merged with Plum Creek on 2016, which also resulted in their share count spike. They have 3 major divisions, but the Timberlands and wood products are the major divisions and wood products manufactures lumber boards, etc and expected to have a significantly lower profitability, ebitda due to market conditions.
WY closed $25.8, that is 25% move up in less than 3 months. Wow.
Not surprisingly, the chart pattern is very similar to CTT...-srockazLong CTT
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