Interesting Read from Stockpickers:Old but important for longs
******Undervalued Dog******, Volume 3, No. 24 , July 13, 1998
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Madera International Inc. (OTC BB : WOOD)
Recent Price: $0.08/share
Daily Average Volume: 525 K
97 EPS: $0.021/share
97 PE: 3.8
Estimated 1998 EPS: $0.063/share
Forward PE: 1.27
Industry Average of PE: 15.85
Book value: $0.50/share
Price/Book: 0.16
Industry Average of Price/Book: 2.46
Div/Shr: None
Yield: None
52-week Range: $0.040-0.11/share
Outstanding Shares: 72 M
Public Float: 31 M
Market cap: 5.76 M
Net Profit Margin (after tax): 34%
Industry Average of Net Profit Margin (after tax): 3.03%
1997 revenues: $ 4.487 M
Estimated 1998 revenues: $12 M
Management holding (including all insiders): 52.5%
Institution holding: 4.5%
SEC Reporting: Yes
BUSINESS SUMMARY AND CORPORATE BACKGROUND: Madera International, Inc., (OTC
BB: WOOD), a natural resources company based in Miami, FL, has two subsidiaries:
Asseradora Itaya, Inc. (Itaya) a Peruvian corporation and Madera International
Environmental, Inc.(Environmental) a Nevada corporation. The Company, in conjunction
with Itaya, is engaged in the harvesting, milling and exporting of timber from South
America. The Company sells its products to major lumber distributors throughout the
world. WOOD is the only publicly traded company which specializes exclusively in growing
and harvesting tropical timber under an approved forest management program. The
Company owns approximately 729,000 acres of tropical hardwood timberlands in Brazil
and 76,000 acres in Peru and operates two mills. The Company is one of the foreign
owned lumber companies fully licensed to harvest tropical hardwoods in Brazil.
Environmental is dedicated to the conservation of the Amazon Rain Forest. Through its
three programs 1) own a tree, 2) replant a tree, and 3) replant a seedling for kids,
Environmental manages and re-plants virgin and cleared timberland in the Brazilian
Amazon Region. These programs will safeguard this region from any commercial
exploitation including farming, ranching, mining and logging or the removal of any fauna or
flora for any purpose.
Some of the most beautiful and sought-after woods in the world come from tropical
rainforest trees. These increasingly rare tropical hardwoods are highly prized for their
outstanding beauty and good working properties.
Color, uniqueness, figuring, grain, finish and texture of these fine tropical hardwoods are
decisive factors in their selection and use in high quality furniture, beautiful cabinetry,
decorative panels, joinery, interior trim, flooring, decorative veneers, and specialty items
such as cutlery handles, brush backs, and musical instruments. Examples of such
beautiful and rare tropical woods are trebol, goncalo alves, Brazilian cherry, purpleheart,
and peroba rosa.
Tropical hardwoods are consumed extensively in the United States, Europe and Japan.
The United States alone imported more than $2 billion worth of tropical woods last year.
World consumption of tropical hardwoods has multiplied nearly 25 times in just the last
four decades, from a little over 4 million cubic meters consumed in 1950, to nearly 100
million cubic meters today. The demand for tropical hardwoods continues to grow rapidly.
According to a research report from the World Resource Institute, worldwide demand for
tropical hardwoods will grow at annual rate of 100% for next decade. World Resources
Institute scientists recently determined from high resolution satellite photography that
the rate of destruction of our rainforests is even greater than previously thought. The
Institute scientists reported that nearly 50 million acres of rainforest are being leveled
every year. More than 19 million tropical trees are being felled every day. More than 40%
of the world's tropical rainforests have been lost since 1940. Many species of tropical
hardwood trees are becoming increasingly rare. Some are nearing extinction. At the
present rate of destruction, 70% of the earth's tropical rainforests will be lost forever by
the end of this decade. As our rainforests disappear, continuously growing demand
pushes the prices of tropical hardwoods ever higher. For example, a Brazilian cherry tree
can be worth more than $30,000.
RECENT DEVELOPMENTS AND ANALYSIS: On July 7, 1998, WOOD announced preliminary
results for its fiscal year ended March 31, 1997. The revenues for the fiscal year were
$4,487,080 versus $792,109 for the same period last year. The earnings for fiscal 1998
were $1,541,847 or $0.021 per share versus a loss of $118,000 or $0.001 per share for
fiscal 1996. We believe that WOOD is one of the best buys in its industry and will be a
star performer. We feel the company is following a well developed business plan to
deliver rare forestry products to the most profitable and expanding markets worldwide.
Many of the other companies in the forestry and wood products industry have had poor
performance due to exports to Asian markets and very low net profit margins due to
extremely high cost of labor in the US, but WOOD's revenues are up over 465% and in
1997 compared to 1996 with over 34% net profit margin. This underfollowed and
undervalued company offers us an excellent opportunity. Its market cap is only half of
98' estimated revenues and the shares are traded at 16% of its book value, thus WOOD
is extremely undervalued.
After considering these excellent fundamentals, the next most attractive reason to
invest this company is management's expertise and dedication to the company's future
growth. The CEO, Ramero Fernandez-Moris, has about 50 years of experience in the
lumber industry. This CEO has only been in charge of the company a little over a year
and has done some dramatic improvement in company's businesses. First, the compamy
started shipping lumber from Brazil about 12 months ago and have been steadily building
their infrastructure. The company has about 5-6 shipments per quarter and this number
will continue to grow for 1998. Second, they have added about 200,000 acres to their
assets for their environmental program that may turn out to be even larger than the
lumber business while at the same time, saving the rainforest from exploitation. Third,
the company becomes profitable in the third quarter and fourth quarter in 1997 with net
profit margin at 34% for the entire fiscal year, compared to the industry average at
3.03%.
WOOD has achieved this rapid growth while maintaining the highest environmental
standards of any resource company. WOOD has received national recognition from the
American Environmental Review on many public TV stations for its conservation and
forestry protection policies. The company is unmatched in its conservation expertise and
this quality of leadership has been well received by their customers. WOOD has done
more to preserve and to increase the Amazon Rainforest than any other organization.
These efforts are part of the company's plan to manage the largest protected forest
coming from private enterprise in the world. This level of environmental responsibility and
leadership will benefit the company for years to come in gaining entrance into new
markets. The Company's wholly owned subsidiary, Madera International Environmental,
Inc., oversees environmental protection programs initiated by the Company which include
"Own a Tree(TM)", "Replant a Tree(TM)," and "Replant a Tree for Kids(TM)". For more
information about these programs, visit their websites at replantatree.com
and ownatree.com. The Internet business has grown dramatically in the past
six months. Though it just accounts for a small part of revenues for WOOD in 1998, it
has exceptional net profit margin at 75% and exceptional growth potential.
If the year of 1997 is considered to be a turnaround year for WOOD, the year of 1998
should be considered to be a take-off year. In the first quarter of 1998 ended June 30,
1998, WOOD recorded about $2 million revenues, 44.5% of entire year' revenues of 1997.
In Brazil, as one of the licensed foreign companies in the lumber industry, WOOD is able
to go auction and buy logs at very low prices and then float them to their mill for
processing while conserving their own forest. If the Company does not use its own
forest, they can still operate profitably by buying at auction and cutting at their mill in
Brazil and shipping to the U.S. or other world markets. They currently have more raw logs
and cut lumber in inventory then at any time in the company history, they had several
very big shipments toward the end of the first quarter, 1998. Demand for this lumber in
the U.S. market and world market is very high and still growing, and the one thing WOOD
does not have to worry about now is that they are able to sell the lumber once it arrives
in the US. In fact, most of the lumber already has a home before it ever leaves Brazil.
It is expected that WOOD will generate $12 million revenues in the fiscal year of 1998.
We look for the Company to earn $0.063/share for the fiscal year of 1998. That is a
conservative figure to base our price projections on. With our conservative estimate of
$0.063/share, that should give the Company a target of $0.60-0.70 in the next year. In
the short term, we are looking for a move to the $0.30 to 0.40 in the next a couple of
months. There are about 32 million shares in the public float. With an average of 25,000
shares per person, we can virtually buy the float out. We believe we should see a rapid
move up in the price of the Company's shares, as the story on WOOD is getting out to
the investment community.
In summary, the excellent growth in revenue and earning will afford the company new
opportunities to apply their business development plans into expanding their market
share. Since the cost of labor in Brazil and Peru is only 10% of its counterparts in the
US, which is the single biggest cost of forestry and wood products business, WOOD can
grow earnings in the 200-300% range for the next 2-3 years. The investment community
will have to pay up for that kind of growth in the near future.
CONTACT:
Ramiro Fernandez-Moris, President
Madera International, Inc.
Tel (305) 774-9411
Or PR Firm
Raymond L. Bary,
The NIBAR Group
Tel: 415/439-4587.
Website: stockwire.com. |
