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Strategies & Market Trends : Mercer International (MERCS) -- Ignore unavailable to you. Want to Upgrade?

To: Nick DeVito II who wrote (174)	8/20/2000 3:58:21 PM
From: Mad2	Read Replies (1) \| Respond to of 196

Nick; In the cc its implied mercs will see a average of 30/tonne higher price this next qtr (630 to 660, this is my interpretation as Lee suggested the discounts should be 5% of sales with current nbsk at 710, which would put the price at 675/tonne). Anyway adding 30/revenue in the 3rd adds .18/share. I figure another .065/share in the 3rd and .065 in the final due to capacity utilization going from 87% in the 2nd to 95% to 102% in the final. Lee implied with another 15-20 mil in capital (I recall the 10k mentioning their digester is the bottle neck) would kick capacity up to 350 tonnes by mid to end of 2001 Lastly it appears that the drag of the paper operations if anything will be lessened (ref -3.0 mil and comments that this number is worst case and is becomming less). Add it up and I see .765/share in the 3rd and .83/share in the 4th The .765 anualizes at 51mil and the .83 comes in at 55 mil. for 51 mil, 0 growth and 15% disc I see 13-14 bucks At 55mil, 0 growth and 15% discount rate I get 15.8 per share. These seem to be reasonable values to me as the upside is kicking the capacity by 70,000 tonnes which puts 14.7 mil on the bottom line (with 450/tonne cost and 660/tonne revenue). Add that into the 0 growth senario with 70mil of income and we are at $24/share Lee mentioned Rosenthal's quality would be deemed in the top 2 or 3 of european pulp providers and in the top 10 worldwide. This of course becomes important for maintaining volume in a weakening market. Given the 0% growth and $660/tonne revenue numbers are realistic I see Mercs getting to $13-16 (between now and yr end) with a target of $24 bucks sometime next year. All predicated on assumptions remaining valid. Best Regards, M2