This is a bit off-topic. Short the papers and use the proceeds to buy the ABH? Pretty agressive but I haven't seen Notable Calls this fired up in quite a while.
- Citigroup is out with an interesting call on AbitibiBowater Inc (NYSE:ABH) saying they have learned the co, with nearly 50% of North American newsprint capacity, has announced a
$60/tonne price increase to be phased in at $20/month April through June.
If successful, they believe ABH would be comfortably free cash flow positive in the 2Q (net of closure costs). Newsprint prices are $620/tonne in February, up from $560 in October. A $20/tonne increase (to $640) is slated for March. The 2Q increase would result in $700.
Citi's “optimistic” estimates for ABH assume that US newsprint prices range between $655-$665/tonne during the second quarter and end the year at $695. However, the ABH move would get newsprint prices above their year-end projections by mid-year. Could even they be low?
ABH’s CFO and Treasurer will present today afternoon at an investor conference in NY. If the bond market is “correct” (with the April 1st bonds trading today around 85), wouldn’t these gentlemen be grabbing pails to bail water back in Greenville?
Citi notes they actually have the sheer audacity to believe management and do not see the sky falling. Firm's target remains $60. Reits Buy.
Notablecalls: WOW! I said WOW! This is a $16 stock, ladies and gentlemen, meaning Citi's tgt represents almost 400% return. Must say I've never seen this kind of stuff coming out of a tier-1 firm. Maybe only in biotechs....MORE