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TEN, TENON LIMITED
Lizard
post Posted: May 27 2008, 10:01 AM
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Actually, on reflection, it is encouraging to note the following from page 8 of the presentation:
QUOTE
(4-5% EBITDA margins today)


That suggests that although revenues might have been squeezed, there has been less impact on margins than might have been expected, despite the high currency. It looks as though they could still report a full year profit of say $3m, putting them on a forward P/E of around 20 at current price (86cps).

 
Lizard
post Posted: May 27 2008, 09:33 AM
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Tenon update found here. (Warning - somehow these guys haven't figured out how much their presentations seem to retard the speed of most computers while viewing!)

In many ways the presentation is quite positive, but it seems strange that this far through the financial year they are going to so much trouble making a presentation based around figures given in "analyst forecasts" while smothering them with disclaimers as to Tenon having made no representation to the market on their results for the year. Still processing the logic to decide whether this means they expect to radically beat, fall short of or match analyst expectations.

My natural inclination is to assume the second of those options - and perhaps that is the case... after all there is a 3 month period before they have to disclose their result, so plenty of time for the market to forget one small presentation, likely to be read only by the most avid Tenon followers.

 
Lizard
post Posted: May 9 2008, 01:45 PM
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No signal off the chart yet (apart from increased vols of late) but depth suggests TEN may have bottomed.

Fundamentally - it's either going broke (which will take more than a few months) or it's most likely very undervalued over the long term. Not an easy call. Definitely unlikely to see a turnaround in US house-building any time soon and the exchange rate still unfavourable, but there is always a chance of the unexpected boost to margins - e.g. a new market, a friendly merger or takeover or perhaps gains from their new exterior wood business. Get ready to place your bets and keep watching that chart! cool.gif

 
plastic
post Posted: Mar 30 2008, 04:19 PM
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Yes I am more inclined to think the RBC route is a safer entry in to TEN with the hedge of its other assets. But what concerns me most is the structure of the RBC registry and its management. They are all ex-Fletcher's. They are not known for value creation and insiders say RBC was only ever set up as a job for the boys.

My interest in this extends from my interest in GEN. GEN were the hired scientists to Arbogen and jointly owned the IP with RBC even before they were RBC. It was never really fully cleared up just what went down and where it all ended up. I wonder if there is a twist in the story we don't know about.

The googly might be this Chinese trade deal. They have been growing GE tree's for some time now, are energy hungry and used to have a share in the CNIFP until it all went bung. They gone screwed if I remember right. But whatever their interest was then I am sure has not changed.

The big grant for science the other day from the G was ring fenced away from forestry with promises it will come later.

I really think there will be a surprise in the forestry sector with perhaps RBC, GEN, TEN, the G and it's CRI's, Graeme Hart, Pure Power Global (Branson) and maybe the Chinese all coming together under the one roof for some mega deal based around energy and market access for TEN's products and the current wall of wood.

I have been taking more than a passing interest in the mega-meat industry merger for signs of the template of thought. I think whatever happens there can be switched across to the forestry industry at the right time.



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Lizard
post Posted: Mar 29 2008, 04:48 PM
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Hi Plastic, I don't think TEN own any of the land now. As it stands, the TEN business probably going to need a few (more) structural changes to occur before value can be realised here - I'm thinking internal sourcing of North American wood and/or sale of North American businesses with NZ supply linking to another market. Looking now, would say not really a very viable business unless the NZD self-destructs or global wood supply comes under more pressure. Though always hard to tell when selling more specialised products - probably also a home decor/fashion trend that comes into it.

On the other hand, there is plenty of value here relative to assets and sales, so there is every chance that more than current value can be extracted at some stage. But until signs improve, it is just a "watch" rather than a "buy".

RBC is another entry to TEN and gives access to the upside from Arborgen - might be good except that the RBC price really hasn't compensated for the fall in TEN, so the implied valuation for Arborgen starts to look high - or TEN look cheap.

 
plastic
post Posted: Mar 29 2008, 02:54 PM
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Lizard, I think you are on to something with this.

Sure there is the short term bang that such a decision will make but I am more interested in the tie ups TEN have with RBC and whether or not they still own any land for re-forestation with biofuel plantings.

Do you have any knowledge of this?



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What did Uncle Mel do to us?
 

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Lizard
post Posted: Mar 28 2008, 04:21 PM
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Interesting announcement today, indicating the potential for up to $NZ90m windfall to Tenon should judgement be given in favour of CNIFP Receivers vs IRD regarding the rightful attribution of GST receipts. By comparison, at an s.p. of $1.05, TEN has a fully diluted market cap of around $70m and Enterprise value of around $163m.

Obviously a slow and complex process, but perhaps worth following.

 
Lizard
post Posted: Feb 14 2008, 12:08 PM
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Half year result looks reassuringly solid - without having yet seen the detailed accounts, it does appear that while profit is minimal, the sales are not yet too deeply affected, operating cashflow is significantly positive and balance sheet should remain sound for a while longer, with debt reduced by $11m during the half. While the current half so far appears somewhat more difficult than the first half was, it is a relief to see TEN holding ground against the tide.

This story is only of interest for the patient, but I am keen to watch for a turning point - a full-cycle valuation comes out between $4-$5 vs current $1.22 share price - so when/if the day arrives, it is likely to provide a good uptrend.

Also good to see mention that they will opportunistically look for sales outside the US for the higher value, specialty products.

 
Lizard
post Posted: Feb 4 2008, 07:30 AM
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Are we there yet? With high NZD exchange rates and a US housing market in crisis, the TEN share price has suffered dramatically - making it the possible "contrarian play of the year" IF the intrinsic value in those $NZ500m of revenues can be recognised.

At some stage, it is likely this will happen. Even in a difficult market, suppliers can often begin to see improvements before the market turns as the weaker companies fall out of the game and margins are restored. The risk is that TEN turns out to be in the weak spot. The only reassurance for that comes from information presented by TEN themselves in an October Presentation, showing that they have had both considerably higher gross margins and revenue growth than major competitors as given in an independent, US industry peer group benchmarking study from Sept 2007.

Some recent positive signs come from the US Home Construction Index which has risen by around 50% in the past 3 weeks, despite predictable falls in housing data.

Unfortunately, TEN is dangerously illiquid to trade on a technical basis and difficult to accumulate (although the Tenon Employee educational fund seems to have gradually picked up quite a few in recent months). However, with potential upside of 200-300% over 18 months outweighing the maximum downside (100% loss), it could be worth a small punt at these prices (around $1.30).


 
 


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