Acadian Timber (ADN:TSE) Fundamental Valuation Report

Fundamental Valuation Report

Acadian Timber(ADN:TSE)

Basic Materials:Lumber & Wood Production

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$17.33 (CAD) 20/02/2019

Weighted Valuation
$19.68 (CAD)

Overall Rating
Undervalued by 13.6%

Valuation Models Analyst Consensus: $19.10 (CAD)
(in order of importance) Adjusted Book Value: $20.51 (CAD)
Multiples: $19.74 (CAD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (ADN:TSE CAD)

Price 17.33
Range 17.27 – 17.48
52 week 14.26 – 20.18
Open 17.27
Vol / Avg. 9609/13132
Mkt cap 289.95M
P/E 11.04
Div/yield 0.85/0.05
EPS 1.57
Shares 16.73M
Beta 0.62

Company Description

Acadian Timber Corp is a Canada-based supplier of primary forest products in Eastern Canada and the Northeastern U.S. The company organizes its operations in two segments, namely: NB Timberlands and Maine Timberlands of which Marine Timberlands segment contributes the vast majority of total revenue. Acadian’s products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to 100 regional customers. The company also owns and operates a forest nursery in Second Falls, New Brunswick.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ADN:TSE

Using a discounted cash flow model we generated an intrinsic value of $11.03 (CAD) for ADN:TSE

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ADN:TSE Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $11.03 1% 5% 1% 5%
WACC (or Ke) 6.89 $15.19 $8.26
Terminal Growth Rate 1.90 $8.51 $14.81
Tax Rate 0.32 $12.24 $9.82
Cash Flow 20,719,178 $10.23 $11.83
Capital Expenditures 658,200 $11.06 $11.01
Long Term Debt 94,762,000 $11.32 $10.75

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $8.90 (CAD) for ADN:TSE. We also generated a valuation of $21.93 (CAD) using other metrics and comparables.
The comparable companies were Interfor (IFP:TSE) and Western Forest Products (WEF:TSE).

Company ADN:TSE End Date Value
Earnings/Share $1.57 (CAD)
Book Value/Share $16.45 (CAD)
Sales/Share $5.04 (CAD)
Cash Flow/Share $1.09 (CAD)
EBITDA/Share $1.28 (CAD)
Price Based on Comps Adjustment Factor (%)
$13.63 (CAD) 15.5
$20.94 (CAD) -54.8
$3.10 (CAD) 57.8
$0.07 (CAD) -5.5
$5.25 (CAD) -11.9
ADN:TSE Ratios Used Average Values IFP:TSE WEF:TSE
13.22 PE Ratio 8.68 7.79 9.57
1.07 PB Ratio 1.27 1.23 1.31
3.49 PS Ratio 0.61 0.56 0.67
16.17 PCF Ratio 5.39 3.87 6.90
16.32 EV to EBITDA 4.10 3.58 4.63

Multiples

Using a multiples approach we generated a valuation of  $19.74 (CAD) for ADN:TSE

Company ADN:TSE End Date Value
Earnings/Share $1.57 (CAD)
Book Value/Share $16.45 (CAD)
Sales/Share $5.04 (CAD)
Cash Flow/Share $1.09 (CAD)
EBITDA/Share $1.28 (CAD)
Price Based on Comps Adjustment Factor
$21.24 (CAD) 0
$19.46 (CAD) 0
$19.50 (CAD) 0
$17.31 (CAD) 0
$21.20 (CAD) 0
Ratios Ratio Average
PE Ratio 13.53
PB Ratio 1.18
PS Ratio 3.87
PCF Ratio 15.92
EV to EBITDA 16.57

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ADN:TSE for the last 10 years was  1.18

We ran the Adjusted Book Value for  ADN:TSE and generated a book value of  $17.36 (CAD)
By multiplying these we get an adjusted valuation of  $20.51 (CAD)

Analyst Data

In the Stockcalc database there are 5 analysts that provide a valuation for ADN:TSE. The 5 analysts have a concensus valuation for ADN:TSE for 2019 of $19.10 (CAD).

ADN:TSE Acadian Timber

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 2 0 3.8000 Outperform 2019-2-19

Current Price: 17.33 CAD

Analyst Consensus
CAD Millions 2019 2020 2021
Mean EPS 1.02 1.06 1.10
# EPS Analysts 5 4 1
Mean Revenue 95.70 99.10 95.10
# Revenue Analysts 5 4 1
Mean Target Price 19.10
Mean Cash Flow 1.30 1.35 1.30
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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