Heres a post from the Raging bull wood thread, sums it up nicely!
TO: ALL SERIOUS INVESTORS IN MADERA (WOOD)
Purpose Of This Post:
To put the investment potential of Madera into reasonably proper
perspective.
Who Are We:
A relatively small group of individual investors (Businessmen; CPA,
Marketing & Retired persons) acting/investing independently of each
other - sharing investment analysis, information and ideas - 8
individual investors.
How Much Madera Do We Own:
Combined shares of all our affiliated individuals - 3,000,000 shares.
Rating:
Short Term: less than 1 year
Near Term: 1 - 3 years
Long Term: 4+ years
Our recommendation: all of the above; our position: long, very strong
Buy
Projected Share Prices:
P/E
FYE Projected Profit (*) EPS (1) 10 20 (2)
3/31/00 $4,655,000 .055 .55 1.10
3/31/01 $11,200,000 .133 1.33 2.67
3/31/02 $26,250,000 .3125 3.12 6.24
3/31/03 $43,750,000 .5208 5.21 10.42
3/31/04 $57,750,000 .6875 6.87 13.74
Remember this stock had a price of $9.00 in 1994, then dropped to
about .20 cents as of November 1996. Decrease of market price caused
by actions of prior management in or about 1995; certainly, not the
fault of present management. (They assumed control in summer of 1996
after a long legal battle).
(*) Assumes a Net Profit % @ 35% - See Fin Stmt - FYE 3/31/98 for
computation.
(1) Assumes O/S @ 84,000,000 (Subject to adjustment for Buy Back)
(2) Note: Industry P/E ratio 44.07; Sector P/E ratio 31.23 - refer
to "Yahoo Market Guide - ratio comparison" .
Projected Sales
FYE Total (1)
3/31/2000 $13,300,000
3/31/2001 $32,000,000
3/31/2002 $75,000,000
3/31/2003 $125,000,000
3/31/2004 $165,000,000
(1) Projections Based on the following Divisional Profit Centers -(A) Lumber -
Base Period - FYE 3/31/99 = $5,100,000 plus - additional sales of (1)
shipment per quarter @ $550,000 per shipment = $2,200,000 =
$7,300,000 sales for FYE 3/31/2000 - then building to $40,000,000
through 3/31/2003; then to $50,000,000 as of FYE 3/31/2004 (Refer to
Fin Stmt FYE 3/31/98 - Page #4).
(B) Herbal -
This was purchased as an existing operating unit.
We estimated for the size of facility and capacity that it will
produce sales of at least $1,500,000 per quarter for the 1st year
sales of $6,000,000 - building to $60,000,000 by FYE 3/31/2004 (Mgmt
expects Herbal business to exceed lumber operations) - refer to PR
release dated May 4, 1999.
© Plywood -
With timberland sales expected to be finalized during FYE 3/31/2000
they forecast the construction of a plywood plant - we estimate it
will reasonably take one year to construct & equip with the 1st year
of operation to be projected @ 3/31/2002 - projected sales for FYE
3/31/2002 - $10,000,000 building to at least $35,000,000 by FYE
3/31/2004. (Review "like" industries for volume/profit; however, you
must factor in variable for Brazil labor prices!)
(D) Environment -
Expect tax status issue to be finalized during FYE 3/31/2000.
Projected sales FYE 3/31/2001 - $5,000,000 building to $20,000,000 by
FYE 3/31/2004. Refer to "Environmental Division" herein.
Herbal Division - Natural extension of Madera's core assets -
Prime example of WOOD's revised business plan.
This was a purchase of an existing fully functioning/operating lab
with both research and production facilities - example "Abbott Labs"
is not just a research facility, but a total operation.
Existing plant capacity;
Existing lab techs;
Existing plant mgmt;
Existing customer list.
Look where they are shipping product - this is certainly not starting
from a "dead stop", but hitting the deck running. The Internet is the
cream, not the supporting base at this time.
Did any of us know out front that Madera intended to be in the herbal
business (itself expanding @12% per year) - WOOD certainly has
access to the automatically replenishing raw materials (like cutting
the grass, but over a larger area) for the price of picking and
processing - certainly good margins.
SUPPORTING INFORMATION:
Confirmation of Operations:
Visits to Corporate Office/Field Operations:
May, 1997 - Investment Advisor visits Brazil - inspects saw mill and
reviews property (timberlands) and field operations.
May, 1997 - One of our individual investors pays unexpected visit to
corporate office in Coral Gables meets personnel and speaks with Regina.
September, 1998 - Another of our individual investors travels to
corporate office (Coral Gables) meets with Ray Fernandez for about
(2) hours responding to various questions and concerns - very good
meeting!
IMPO - This company is solid and straight!
Stock Buy Back
Madera announced on September 1, 1998 a 5,000,000 share buy back -
In our face to face meeting with Ray Fernandez he stated that WOOD
intended to not only buy back the 5,000,000 shares, but most probably
WOOD would extend the program to 15,000,000 by March 31, 1999.
No Reverse Split
In our meeting with Ray Fernandez he stated that Ramiro is 100%
opposed to a Reverse Split; Ramiro favors a straight buy back to
maximize shareholder value.
Note: A Reverse split is generally used by companies without adequate
cash to effect a reduction in the amount of o/s shares; whose
business is either flat or growing at a rate not attractive to the
investment community, wherein management bury prior financial errors
by artificially restructuring the capitalization by reducing o/s
shares & increasing share price to achieve a listing on the small cap
market of NASDAQ - this creates a classic "crash & burn" syndrome -
now "less shares and possible decline in price" to boot! Madera is
not in this position!
Sale Of Land vs. Debt Financing -
Sale of excess timberland inventory to acquire needed liquidity
to "substantially" expand business plan and operations.
Best Approach! Why?
No outside loan officers/lenders attempting to direct/interfere/govern
/control your operation.
No equity given away to get a reasonable loan amount.
No unwanted members on Board of Directors.
No restrictive convenants on Balance Sheets items or limits on operations.
Fernandez family continues to control their own destiny.
Loan?
When cap value of company - 84,000,000 shares x 6+ cents =
$5,040,000! Question: How do you get $6,000,000+ in needed financing
when the cap value of the whole company is $5,000,000! You simply
don't @ reasonable terms/rates; try it in your business and you will
not like the answers or result. What you get is a song, but you can't
even select the music!
Divisions -
(1) 1umber (core business) with distribution center (to come)
(2) Herbal
(3) Environmental
(4) Plywood - PR dated 1/22/99
(5) Additional expansions - Yet to be announced
Spin-offs -
What do you think! No doubt about it - Refer to 10K - FYE 3/31/98
Page # 7.
Why?
The sum of the parts are worth more than the whole!
Each "profitable" company draws its own market value, w/o being
hindered by any problems of another operating entity - maximize and
recognize the good divisions!
Environmental Division -
Per Ray Fernandez - the public wants a tax deduction for their help
in protecting/preserving the rain forest; so Madera is apparently
filing the necessary documentation with the IRS to give the public
what they want, then the division will be promoted and take off.
Small Cap Market
WOOD will qualify in all respects except the market price rule - that
should be met when the infusion of cash (via land sales coupled with
profitability) and application of this capital to their revised
business expansion plans with resulting profits in the near term.
Capacity
As of May, 1997 - the investment advisor who visited their operations
in Brazil reported that the saw mill at Benjamin Constant, Brazil
has the capacity at "cruise" speed to produce $2,000,000 in sales per
month; now you know why WOOD wants the other saw mills and what
their use will produce. Note: Benjamin Constant is just across the
river from "Tabatinga" site of Herbal lab.
Retail starts @ .50
When the stock price reaches .50 cents the retail side begins to kick
in - why? Well, for one reason your small or micro cap mutual
managers do not like to buy companies until the company proves itself
via consistent profit - they are using the "prudent investment"
principle - they are willing to wait and pay for success and related
safety.
Also, mutual funds are governed by the investment cap (limit) of 5%
of total o/s shares limitation - it doesn't take much of an
investment to hit the 5% limit when dealing with thin cap companies.
Market Maker Projection-
Good market makers we have spoken to have conceded that WOOD will
penetrate the $1.00 level this year - needless to say IMPO I believe
they are speaking straight on this projection.
Book Value -
Recent investor challenges on book value - this is really a humorous
challenge:
As you may know independent CPA's in employing standard auditing
procedures in doing their annual audit automatically measure & check
balance sheet accounts for the possibility of overstatement - if any
items are not backed up by confirmation and/or outside value
certification the CPA's will either qualify their opinion or write
the asset down to market value - notice that WOOD has a "clean"
unqualified Auditor's opinion - what more do you want! Also, the
land account is supported by an outside appraiser's "survey". When
one of our investor's visited WOOD's office in May, 1997 we were
given a copy - it is very detailed and complete! Challenges are not
supported by fact.
Underlying Asset Reserve Value - 8 - 10 billion dollars in hardwood
lumber reserves - Refer to "Survey" Analysis; also, "Equities"
magazine article is consistent with survey facts.
Decline In Market Price -
In 1998 the stock price of WOOD dropped dramatically - WHY? Primarily
from a heavy short interest position on the part of certain MM's- in
fact according to Ray Fernandez there were 22 uninvited market makers
handling WOOD in 1998 - no additional comment is needed.
Publications -
"Equities" magazine article - dated November, 1996 by Sal Nuccio
"Miami Herald" article dated December 9, 1996 by Jane Bussey
"Survey" appraisal valuation by "Seiva Agro-Forestal" State Registry #041665619
PR release dated 9/01/98
PR release dated 1/22/99
PR release dated 5/04/99
PR release dated 9/08/99 & 9/09/99
Stockholder Meeting -
We believe a shareholder meeting will be called after the timberland
sale is finalized. All shareholders holding any substantial position
should attend - I am sure MM's, media/financial magazine reporters,
stock analyst, small/micro cap managers will be invited and with
WOOD's new financial position all attendees will want to know their
business plan. I am sure WOOD's mgmt will outline their future plans
at that time.
Conclusion
(A)Based upon the misinformation being circulated each "real
investor" should rethink their position regarding this stock - to
determine if you are adequately positioned to take advantage of this
stock - one like this doesn't come along very often - just look at
what's out there to choose from!
(B)Most investors I read on the net act like the 5 or 10 yard line is
the goal line - I don't think so - you're selling the tree, but what
you could have a shot at is the whole orchard if you simply get
adequately positioned & go reasonably long term.
© The business plan in place in 9/97 called for a 6 million dollar
financing plan to reach 40 million in lumber sales within 4 years;
what do you think 96 million (less sales expenses) will do to
a "revised" business plan - in what reasonable time frame? Also,
consider the yearly profits to be generated from the various
operating divisions.
(D)Use any reasonable capitalization value or rate on the 96 million
net land sale proceeds you feel is fair and please explain to
yourself what financial power is recognized - then make your own
decision as to what is going to happen in the near & distant future!
Recommendation
(A)Fully research all printed matter available to determine how this
company can adequately fit into your portfolio.
(B)If you are a skeptic - good! Any reasonable investor must be
skeptical to survive. However, even though we are not in the
investment business, by any standard, or in the business to render
assistance we may be able to help people who really want to make a
reasonably priced sound investment, but lack sufficient information!
If you are sincere in doing additional homework and you are willing
to prepare a self-addressed stamped envelope, we will send you
various items of printed matter we have to give you the financial
support you need (i.e., Equities magazine article, Miami Herald
Article, Land Survey Appraisal, etc.). Please remember, copies cost
money and time - we do not want to waste any money, so if you're not
really interested, please don't waste our time or yours! Upon your e-
mail reply to this post, we will post our office telephone number for
your use in requesting the information if specifically requested by
you to do so.
© If you are cynical then we really can't help you - we are
notselling you anything - if you can't see a good opportunity,
Icertainly can't convince you!
(d)IMPO this company is a real undiscovered (at this time) Jewel -
best to all who have taken the time to read this.
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Sorry I don't know where it originally came from.
Dave
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