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Player Avatar Stocks1843 (58.79) Submitted: 5/29/2007 8:55:28 PM : Outperform Start Price: $34.08 POPE Score: +57.52

Share Price: $45.

This company has a three pronged approach to making money. Valuing the logging and management segments, as they are the online consistent cash flow, the company should earn $15M in FCF from here on out. This estimate is very conservative and should be much higher. Using a DCF with r=20%, the present value of FCF is worth $90M. Assuming a growth rate of ZERO.

The company has a book value of $87M. The intrinsic value of these assets are significantly higher because former assets (real estate) sold for twice book value or higher! Even at conservative estimates, the intrinsic value of all the assets, ignoring real estate up for sale, is worth $110M.

Adding earnings and assets together, I came up with a value of $200M, the current Market Cap of the partnership. If you are looking for a discount rate of 15% then you have a value on your hands.

The little extras:

Real Estate: The company had a record year in 2006 for real estate and looks much better (earnings wise) than it really is; however, at the current price you are getting the entire real estate division for free!

Timber Portfolios: The company is making good decisions to grow shareholder wealth by creating a timber fund for hedge-funds to invest in. POPEZ created one fund last year and has a 20% stake in the $60M fund. The management is creating another fund aiming for $100M in 2007, which they will have another 20% stake. Along with a 20% share of the cash flows from these properties, POPEZ receives revenues for managing the timber. A wise decision by the management.

Management: The managers of the company are very unit-holder driven and look to always give a good return on capital (30+% last year). The company has been around for 150 years and as a one of the leading timber consultants in the country, has obviously proven themselves in the industry. They also increased their holdings in the company to almost 3% recently. This is not a large number, but an increase in investment is never a bad signal.

Dividend: The company also pays a small dividend. Currently at $1.12/year, this can be discounted back against inflation of 3% to value the company at $22.60 with a dividend growth rate of ZERO. A growth rate of 5%, not that unlikely, values the company at $45. While $22.60 this is half of the company's current price, mixed with the value of assets it is still a good play.

I bought it, I think you should too. I am not an industry insiders so if someone wants to read the last few annual reports and tell me where I am wrong on the numbers, feel free.

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