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Canfor Corp. (OTCPK:CFPZF) investors might want to cross their fingers and hope for the best when a decision is finally reached on pending U.S./Canadian lumber arbitration, says RBC Capital analyst Mark Bishop.

In a note to clients, the analyst said:

The ruling may be a negative catalyst for Canfor shares, adding an outcome may be announced as early as February.

Under the 'best case' scenario, Canadian producers would carry on paying a 15% tax at current pricing levels. Under the 'downside case,' producers will be required to pay retroactive tax payments of 7.5%, and may continue paying tax at the higher 'surge' rate.

He added that an outcome may be announced as early as February.

Mr. Bishop said Canfor has an estimated C$26-million or C$0.12 per share in potential retroactive taxes from 2007 and an incremental C$10 million per quarter.

For now however Canfor's biggest problem appears to be the negative impact on the company from weak lumber and panel commmodities prices and widespread curtailments. Mr. Bishop revised his 2008 EBITDA forecast from break-even to a C$71-million loss, and decreased his earnings per share estimate from a loss of C$1.62 to C$1.24 to reflect his downward revisions to commodity prices.

He also reduced his price target on Canfor stock from C$8.50 to C$8 and downgraded his rating from "sector perform" to "underperform," telling clients the recent strength in Canfor shares is based on takeover speculation, not underlying business conditions and performance expectations.