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Rayonier Advanced Materials Inc. (RYAM)

NYSE - NYSE Delayed Price. Currency in USD
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7.75+0.33 (+4.45%)
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  • M
    Melvin
    BofA maintains Buy rating on RYAM and $11.50 PT

    Rayonier Advanced Materials: Post 1Q: Favorable mkt conditions, FCF & deleveraging keep us at Buy
    5/6/2021 1:13 AM

    We reiterate Buy on RYAM following sell-off (-23% post-reporting) and given favorable mkt conditions across product lines. RYAM should also generate well above $100mn in FCF in 2021 and we expect it to delever, lessening a key overhang for stock. Raise 2021 EBITDA forecast on strength in lumber & DP/fluff prices. Recent pulp price gains should provide tailwind in 2Q/3Q.
  • M
    Max
    Incremental progress. But it feels like it's always something. Shipping constraints this quarter. Would have been nice to see some sequential top-line growth in HPC but I guess that's too much to ask.

    It's clear now what direction they are moving. I'm thinking that's a business with a pretty long runway, similar to EV batteries and such. It's all part of the transition away from petrochemicals. But I have no idea how quickly that market will ramp.

    I don't see any reason for the stock to go down. But given the lack of topline growth in their main segment, it's hard to see the rationale for raising price targets.

    I guess we'll see.
  • M
    Melvin
    May 7, 2021...two directors file Form 4 with the SEC. Insider purchase. Total shares purchased...45,000 shares.
  • w
    wiley
    I skimmed the report and Paul called his “6.3x trailing ebitda” sale price “attractive”. He needs to go. He got taken to the cleaners. The board needs to go too.

    A reasonable forward look at lumber is $750, so just under half today’s pricing. Their Q1 costs were $597/mfbm. Implies margins at full capacity would be about $152/mfbm. Shoot, call it $100 even. That $75M annually.

    Domtar for a lesser business (lumber has more upside than paper) may get 7x the consensus forward ebitda by my balance.

    RYAm should have been 8x on 75m or $750m — not $220.

    But the crazy thing is $1000 lumber may be the long run norm. Per Q1 numbers that is a margin of $403 or annual revenues at current production 80% of what’s possible, at $241m per annum.

    Selling the business is fine. Getting just robbed blind is another thing. That comment stiff out and speaks to a complete and profound lack of judgment and business acumen. I am not clever enough for the other segments, but i can infer about their fit to run the business based on the lopsided GFP deal.
  • M
    Max
    RYAM is shedding non-core assets. It's also shedding debt.

    Is this company now a buyout candidate? Who might be interested?

    CE? EMN? Anyone else?

    Does this make any sense to anyone?

    Just kind of throwing it out there.
  • B
    Bellamaxi
    CEO taking a good slapping on this one.... shareholders too. Exercise restraint, remember the 3 day rule.
  • M
    Max
    While the stock continues to get obliterated (my paper losses are near $30k), I'm keeping myself occupied by trying to figure out just why Paul dumped a skyrocketing commodity to focus on these nascent markets.

    Here's a link to an article about the nanocellulose market. They peg the CAGR at 21.4%. Clearly, that's a growing market, but we're talking about small numbers. They project growth from $146m in 2020 to $418m by 2026.

    Anomera appears to be a very small company. DNB has them with six employees and about a million and a half in sales. Not exactly a strategic partner that makes me jump up and down with excitement. Link below.

    Of course, in the press release, RYAM thinks that Anomera's CNC products have a TAM of $8B. I'll believe that when I see evidence that they can get this product up and running and growing at a 40% CAGR.

    Lyocell is pegged at a 12.6% CAGR. See below.

    I don't disagree with Paul that bio-friendly is the future, but, damn, the market is NOT happy with the earnings loss, the lumber deal, or the lack of guidance going forward.

    I'm expecting across-the-board downgrades tomorrow as analysts move to the sidelines while this company figures out what it wants to be when it grows up.

    https://www.gminsights.com/industry-analysis/nanocellulose-market
    https://www.dnb.com/business-directory/company-profiles.anomera_inc.b423f0c60f7b8f35d4011225ec08978c.html#:~:text=Anomera%20Inc%20is%20located%20in,million%20in%20sales%20(USD).

    https://www.transparencymarketresearch.com/lyocell-fibers-market.html
    Nanocellulose Market is expected to grow at a CAGR of 21.4% from 2020 to 2026. Nanofiber cellulose segment would remain lucrative throughout the forecast period.
    Nanocellulose Market is expected to grow at a CAGR of 21.4% from 2020 to 2026. Nanofiber cellulose segment would remain lucrative throughout the forecast period.
    www.gminsights.com
  • M
    Max
    They did $1.74b in sales in 2020.
    $394m of that was lumber. And another $74m was from that newsprint plant. So, they are losing $468m of top line (more, really, given the explosion of lumber prices this year).

    The figures I've seen peg the CAGR of the specialty pulp business at just 3.36% from 2020 to 2024.

    At that rate, it will take a decade to get the top line back to $1.74b. lol.

    I guess that's a question for Paul. What exactly is the opportunity going forward? You gave up an asset going gangbusters. Surely it wasn't to pursue more 3.36 CAGR opportunities. So what IS the opportunity?
  • M
    Melvin
    Per Bank of America analyst...

    4/13/2021 1:58 PM

    RYAM to sell lumber & newsprint assets to GreenFirst for $214mn. News consistent with LT plan to divest non-core assets. Price seems reasonable and, at 6-7x normalized EBITDA, is in range of past transactions in sector. We reiterate Buy on RYAM".

    Download PDF Report (333kb) »

    Research Category:
  • M
    Max
    Okay, let me get this straight...RYAM just sold all its lumber mills and offloaded its god-awful newsprint business, the deal is worth $214, they net $182m in cash, the rest in Greenfirst's rather dismal stock, AND RYAM gets to keep the $110m in duties paid which will eventually get returned to them.

    This could lop off 20% from their billion-dollar debt load. And they still have another $100 million coming from those tariffs, which together could pay down 33% of the debt load. And save them money on payments every year.

    And the stock is...down???

    What the actual fudge?

    Is it a perfect deal? No. Would I have liked to see a higher price? Sure. I would have liked to see a $400m price tag for this deal. Absolutely But the bottom line is that he maneuvered out of one horrible business and sold off another at all-time highs. It's not a bad deal.

    The real takeaway isn't the purchase price. It's that clearly, Paul thinks the pulp business is about to take off.

    As usual, Wall Street is being short-sighted here.
  • M
    Max
    Thoughts about this upcoming CC:

    1) I'd like to hear more about the offsets for lumber once this deal is closed. If lumber prices stay high, I want to know how much will they be able to control input prices for HPC. I'm not sure I completely understood that part of the deal so I'd like to hear a clearer explanation.

    2) What exactly are the plans for this excess cash? Every $100m of debt they pay off is $.12 in yearly earnings. They have over a billion in debt. It would be nice to hear what they think their target is and in what timeframe. I'd like them to pay off $500m in five years. I think that's totally doable. They can earmark $100m from the lumber transaction. And then use the lumber tariff refunds for another $100m. That means paying down $300m in five years from operations, i.e $60m per year, i.e. $15m per quarter. Totally doable.

    3) I want to hear what they think the growth opportunities are going forward. They didn't exactly get a great price for the lumber division, as we've discussed, but at least they are out of newsprint, so now the question is what kind of return can they get by focusing on their core market? I sure hope it's more than 3.5% CGR, but I'd like to hear "the vision thing" as we used to say.

    Anyone else? Thoughts?
  • L
    Laser
    What "Lumber Assets" did they sell? I thought they owned no lumber so this must mean mills?
  • w
    wiley
    It’s a bad deal given the reality unfortunately. Rick Doman picked Paul’s pocket. I actually have ten grand in GFP randomly so I’m OK with it. The issue is the capacity multiple is what you saw in the low point of 2019 with the Dunkley transaction. This deal is $348/mfbm on a Q4 production basis. That’s very poor, even for sub optimized assets. It’s even worse given attainable nameplate capacity of 755 mmfbm — that pushes it down to $283/mfbm.

    Why is it the SP down? They walked away from as much as $349M in lumber cash earnings in 2021... and gave GFP a possible 7 month payback period.

    The lumber biz did $42M in ebitda in Q4 on $669 lumber. Thats $238/mfbm margin. We may see $1000 all year. So the extra increase in pricing implies at least Q1 and Q2 margins of $569/mfbm, and that’s light give the duty got cut in half.

    The net net of this is the known impact in H1-2021 at Q4 production levels is EBiTDA of $174M. Even if the back half of the year is 30% lower for pricing, that kicks in another $83M.

    There is zero reason you could not get this price any time, even in poor markets. Frankly you could get more. I can’t fathom how shortsighted it is to give away your known upside for no good reason. It would be different if they got a material equity stake out of the deal but 15% is lame.

    Guess I have to bulk up my GFP position. What an absolute coup
  • M
    Max
    Anomera's leadership team.

    These are some smart folks. That's good. The board has two Rayonier seats, someone from Chanel, and some of the leadership team.

    I think this is an interesting company, actually, and RYAM owns 44% if I read it right. The question is how fast can they grow? And will RYAM's bloated debt position curtail that growth when the time comes to expand.

    Lenzing built a huge plant in Brazil to make Tencel. It cost them $1.2B. Just saying.

    Meanwhile, lumber prices are at all-time highs: $1544. If lumber prices stay above $1000 through the end of the year, then Paul should definitely be fired. I'm willing to give him the benefit of the doubt for now, but if he's that wrong, I think his leadership is in question and he should go. This is a career-defining decision for him.

    https://www.anomera.ca/team.php
  • M
    Max
    May 2021 RBC Capital Downgrades Outperform Sector Perform
    Oct 2020 RBC Capital Upgrades Sector Perform Outperform

    Price target apparently remains $11, which is just weird.
  • M
    Max
    Well, after that call, we should clearly add Lenzing AG (LNZ.VI) to the list of possible suitors as they are the makers of Tencel fabric. The market cap is about $3B or so.
  • M
    Max
    We'll, someone just blew out a position. Stock is down big on three times average volume.
  • M
    Mike
    Why the drop? I know for a fact that due to big price increases from Chinese manufacturers, the production of board is at full capacity. I think they will deliver good numbers for next quarters. Time will tell...
  • J
    Jack
    The assets they sold were garbage and a huge drain on the company’s bottom line going forward. The fact they got anything for them is huge news, and leans the company up. The Tembec acquisition was such a joke but at least they are correcting the errors one asset sale at a time. A decent Management team and this is $20 tomorrow.
  • M
    Max
    There's support around $7.50. If it breaks below that, then $6.50. If it breaks below $6.50 then, well, the stock is broken and the market makes no sense whatsoever.