market folly

Next up in our notes from Invest For Kids Chicago is Alex Klabin of Senator Investment Group.  His presentation was cleverly entitled 'Pulp Friction.'

Klabin's Thesis on Rayonier (RYN)

•    Company has two main business lines:
•    7th largest of US timberland "TimberCo" worth around $4 billion
•    Performance fiber business "FiberCo"
•    Value realization event is potential spin-off of FiberCo in 2013
•    FiberCo #1 provider of cellulose specialties (ether)
•    FiberCo has no true public comps.  It's comped against commodity pulp players such as Tembec but this drastically undervalues the business due to the value added nature of FiberCo’s business vis a vis other commodity pulp businesses.
•    Rayonier has a lack of buy side following due to disparate nature of asset (both FiberCo and TimberCo)
•    Has ether bulking agent for foods
•    Wood chips could go into a MLP which would be worth $7 per share
•    As fiber business grows, the current REIT structure may be untenable which would force the spin-off of FiberCo (Perhaps in 2014)
•    Rayonier is 30% to 60% undervalued currently

Market strategist Jeff Saut also recently recommended Rayonier in his weekly commentary.


For the rest of the hedge fund presentations from the event, head to notes from Invest For Kids Chicago.