Growing wealth one tree at a time

Nov 2nd, 2009 – 2 Comments

I would say that at these prices and and given a very long term investment horizon you have a good opportunity with CFZ. Establish a core position and then trade on strength and weakness to get your adjusted cost basis to zero as quickly as possible.


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cathay

Hi Lou,

Your take on Cathay Forest (CFZ) please. Their trees are growing fast, China is booming but CFZ is not moving!!! It may be another Sino Forest (TRE)!!!

Kind regards,
Bish

Hi Bish,

Thanks for the assignment but lets keep in mind that Cathay Forest Products Corp. ( CFZ TSXV) has a  long road to travel before it can be viewed in the same light as Sino Forest Corporation ( TRE TSX) which has been developing its business since 1994 giving it a full decade lead on CFZ.

Cathay Forest Products is focused on helping China overcome a shortage of wood needed to grow its economy. The company began planting fast growth poplar plantations in 2004. The poplar species selected for the plantations were identified as having the best potential in the local environment and are forecast  to reach suitable  size  for harvest in a five year cycle.

Poplar fiber is used in making pulp, paper, wood pallets, and particle board. CFZ has 13,000 hectares of poplar growing  in various Chinese provinces with the vast majority in Shandong. CFZ also manages standing timber assets fromm which it generates cash flow from selected harvesting intended to grow wider trees over time.

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The three year chart shows a nice recovery from the lows with a double bottom pattern signaling the move higher.

Currently the stock is experiencing resistance at the $0.70 level.

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The three month chart gives a good view of the resistance at $0.7o. The MACD turned down in September suggesting that upside momentum had dissipated.

The stock is also testing support on its 50 day moving average which puts a caution flag on the track. If it breaks below $0.625 it would be a signal to look for an exit as there is very little support until $0.475

Cathay has been growing its revenue but has yet to get over the hill to profit.

Cathay generated $14M in revenue  its Q2 while Sino Forest generated over $220M in their Q2.

I think that tells you what a 10 year head start will create in a business where you are depending on nature to grow your wealth.

I would say that at these prices and and given a very long term investment horizon you have a good opportunity with CFZ. Establish a core position and then trade on strength and weakness to get your adjusted cost basis to zero as quickly as possible.

Happy Capitalism!

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