Forum Archive Index - July 2002

["Richard Hooper" <hoop@ihug.co.nz>]

I agree with Snoopy, sorry winner69 ...I do not invest by looking at the
past. Yes CAH was a dog and at the moment it is attempting to transform
itself. Over the last year its management has taken the knife and has
attempted to cut costs and restructure the company into incentive based
smaller units. Being too big under small top management resulted in sloppy
management,the smaller unit type of thinking I liked so I invested into CAH
at $1.50 last year.
  I am happy at the moment as the (gutsier) smaller unit management style
seems to be working, as the market seems to like it sharepricewise.

Winner ...I think this CAH is a different animal now to that you spoke
of...... In defense to the company last years result under this better
management, it should be reminded that all of its markets hit cyclic low
points similtaneously  ( very rare event), yet its  losses were acceptable.
Its gearing has changed. Imagine now what could happen when this cycle is
back to say normal or average (midpoint +50%) this company with less fat now
will produce profit far in excess of previous results. This future scenerio
in beginning to be built into the shareprice at present. I did not expect
the shareprice to move one way nor the other with the 1/2 result because the
market already had this restructure factored  in on its shareprice ....
Under normal conditions (+50% cyclic speaking) annual profit should be
approx $250 m . This I think should not be too far in the unforseeable
future, and I would expect the price to go to a possible $2.60 chartwise. I
will revaluate my shareholding then ....if it takes another 2 years to do it
I am happy as 70% profit over 3year investment relates to 25% per year incl
Divs.

Warped thinking you might say ...perhaps....but I like the management
activity at the moment..they are trying to turn this titantic ship
around...because it is so big and cumbersome it is going to take some time
after you turn the steering wheel for it to actually move in the direction
you want it to go...I see no iceburgs then so I bought in @ 1.50
After one years investment I am 30% up on my investment so I can't be
totally insane in investing in this out of favour stock. I can think of alot
of worse results than +30% I could have made by investing in.. in favour
stocks :)))))).

Buying any share is a risk ...CAH may not reach it's goals, if not, I am out
of there...Taking what is left of my investment and move on.....At the
moment I can not see any warning signs ..rather the reverse.......There is a
remote possibly this could be a "game breaker" stock ...Cyclic Stocks are
hard to pick at the best of times, but the laws of  multiple oscillations
say that the chances of all cycles hitting their low similtaneously again
within 2 years is astronomical low ..usually happens every 30+ years in CAH
case.
There is a much improved chance that all cycles will perform above normal at
the same time.
 My very rough reckoning is that if most of CAH market cycles are at +75%
with say pulp market cycle at +50% (average) profit of $ 450 m does not
sound unreasonable...PE would  look  very low at todays pricing.

One other factor not mentioned by anyone ...CAH has successfully cracked the
Chinnese market. One of the few NZ companies ever to do this. The rewards in
China look huge, it could be a very profitable way for CAH to get rid of its
soon to come surplus timber mountain that theatens the NZ industry.

The USA factor is less of a worry to CAH  than the Asia factor which
happened in 1998 as Asia ( incl Aust & NZ) are the main markets for CAH

SUMMARY ( from my waffle)  CAH has potential ..so we will leave it at
that,and see what happens,shall we.
Hoop

PS  I have enjoyed your comments ..hope they continue.

----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Thursday, July 18, 2002 11:32 AM
Subject: Re: [sharechat] CAH


> Hi winner69,
>
> >
> >
> >An extremely well managed company? - how can you say
> >that Snoopy as  CAH carry on the long tradition of value
> >destruction?
> >
> >
>
>
> I think it is possible to have a well managed company in a dog of an
> industry.  There is some quite innovative stuff going on at CAH.
>
> Like the idea of breaking their business up into quite small focussed
> units.
>
> The idea of not fully pruning their trees like they always
> did because there is no guarantee that the extra labour will
> translate into future value is innovative too.
>
> I admit the history, share price wise, ever since International Paper
> has become involved, is not that good.   Over the last twelve months
> or so, though, I am showing a nice little gain.
>
> CAH have now built a substantial presence in Australia, which I
> think is the right way to go.  I'm looking forwards, not backwards.
>
> If you want to see what happens to a company that doesn't take these
> initiatives, look at FFS.   CAH well managed?  In comparison to FFS,
> I think so!
>
>
> >
> >
> >A return on capital invested of only 3.4%.
> >CAH cost of capital is 14.6% (PWC).
> >
> >
>
>
> Where does the cost of capital figure of 14.6% come from?
>
>
> >
> >
> >Maybe this is why the market has not reacted
> >to this 'good' result.
> >
> >
>
> Holding steady in a falling market is a 'good' reaction
>
> >
> >
> >Snoopy - bit puzzled why you have CAH.  Doesn't seem
> >to fit with either your income strategy or your growth
> >strategy. And Warren wouldn't be too impressed either.
> >
> >
>
> Fair comment.  I guess I am looking to quit CAH in the medium term
> for those very reasons that you mention.  I did quit my small holding
> in FFS a few years back, but held on to CAH as the best forestry
> investment I could make in this country.  I still believe CAH is the
> best forestry investment around, but I am not so sure that forestry
> is the place to be invested at all any more....
>
> SNOOPY
>
>
>
> ---------------------------------
> Message sent by Snoopy
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
> "You can tell me I'm wrong twice,
> but that still only makes me wrong once."
>
> --------------------------------------------------------------------------
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>


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