Sino-Forest (TSE: TRE.A) A STOCK FOR THE FUTURE!! Message Board

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Gold/Mining/Energy : Sino-Forest (TSE: TRE.A) A STOCK FOR THE FUTURE!!

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To: mick who wrote (240)	1/30/2000 3:49:00 AM
From: mick	Read Replies (1) of 265

A $ 10 Increase in Chip Prices Should add $ 0.06 to Earnings During the last pulp mania (when I was in the industry), chip prices for BC coastal mills were over $ 200 US BDMT (I think it peaked at $ 285, but I can't recall for sure). Pulp mills were scared of a fiber deficit. Well, we know that never came to be, but there is a positive correlation between the two. My over simplified analysis goes something like this. Fact - in the 3rd Q, TRE sold chips at $ 95 US per BDMT and made a profit of $ 14.5 per BDMT and sold 617 kBDMT pulp is an international commodity as are chips and there is a direct correlation between the two Speculation TRE receives $ 105 US per BDMT, sells 620 kBDMT in the quarter (adding $ 10 per BDMT to the bottom line) costs rise slightly (higher fuel) add an extra $ 4.5 MUS ($ 7.30 per BDMT) to the earnings, and you get $ 0.18 US eps (basic) When I look at justification for this, I think there is a possibility that that we may be even more pleasantly surprised. TRE chip price seems to be affected by the Japanese market (though export shipments run at 5 %). My buddy at the Prince Rupert mill tells me they are going full bore now, suggesting to me that the Asian market is recovering nicely (they sell mainly to Japan/China paper makers). A 10 % price increase in raw materials is not that large a swing in the pulp and paper game. Is my analysis overly simple ? Yes. Will we see $ 200 prices for chips? Very doubtfull (but fun to think about :)) Did I include that TRE typically increases shipments by more than 20 % in a quarter? Nope. This is what is so great about this company. They can make money at the bottom. Wait till we see what it does at the top of the cycle ! Cheers

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