Forum Archive Index - January 2000

["Mike Hudson" <mikehudson@clear.net.nz>]

I think that the problem with FFS is symptomatic of the problems that the
whole Fletcher Challenge Group have had for the last ten years or so; They
pay far too much for their aquisitions, UK Paper, the American construction
companies being prime examples (there are also lots of small ones some of
which I had a personal involvement with when I was a middle manager with the
company some years ago) FFS follows the trend; the Central North Island
State Forests were another example where they bought at the top of the
market and incurred a mountain of debt. The idea was to harvest and sell
logs earlier than normal to generate cashflow to service the debt. It all
went to custard when the demand for logs plummeted during the Asian crisis.
Although demend has now recovered, prices haven't.

FFS is also affected by the FCL letter stock debacle and the fall out with
their Chinese partners. I understand that the whole kit and caboodle is for
sale and that interested parties (Weyerhauser?) have been checking out the
assets in recent weeks.

Some comments from a research report (Oct 99)

-  The outlook for major log price markets Japan and Korea remains difficult
on price and volume.
-  We expect a long period of low prices
-  The share price appears to be factoring in a stronger recovery than we
anticipate
-  Financial risk in FFS due to interest cover of 1.0 remains high
-  Price 0.83
-  Recommendation SELL

Having said that the price can't get much lower and I would hang on and wait
for the half yearly results which are due out soon and may be better than
expected. At least your money is not as much as risk as in some of these
tech companies that are the flavour of the month at the moment.

Disclosure: I bought FFS in May 1997 for $2.05, more in Nov 1997 at $1.38
and sold in August 1999 for 0.99, so my advice is probably not too reliable


Cheers
Mike H










However with the price down as low as it is it is not likely to get much
worse and



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