« Ameresco (AMRC) Misses by 7 cents: Look to Buy on Any Sell-off | Main | New Flyer Sees Bus Market Revival »


       

PFB Corp Integrates Upstream, Just in Time for Green Housing Market Upturn

Tom Konrad CFA

PFBCorp_logo_img11[1].pngOn May 9, green building firm PFB Corporation (TSX:PFB, OTC:PFBOF) announced that it had signed a letter of intent with NOVA Chemicals for PFB to acquire NOVA’s Performance Styrenics business.  The all share deal will give NOVA an equity stake in PFB as well as two seats on PFB’s board.

PFB’s Plasti-Fab subsidiary currently sells Expanded Polystyrene products (EPS) such as Insulated Concrete Forms and Structural Insulated Panels into the North American green building market, and as a result is a customer for the Performance Styrenics division’s EPS resins.  Over the last few years, volatile materials costs have been a large source of uncertainly in PFB’s earnings, so the acquisition should lead to more predictable earnings at the company.

While the size of the equity stake has not been announced, I expect it will be significant given that two board seats come along with the stake.  This boost in size should be beneficial to PFB’s shareholders given the company’s current small market cap ($38 million) and low liquidity (only $4000 worth of shares trade hands on a typical day.)  The added size and revenues will allow PFB to better afford the costs of a market listing, and may enable a move to a more liquid market such as AMEX, or a wider class of investors to invest in the stock.

Although the low liquidity makes it difficult for investors to buy PFB’s stock quickly, a patient investor can acquire it at a very attractive price.  PFB typically trades between $5.50 and $6.50.  At $6 a share, PFB pays a 4% dividend, and has a trailing twelve month price earnings ratio of 11.  Book value per share was $6.72 at the end of 2011.

PFB is beginning to see its green building markets revive:  First quarter earnings per share were up 6 cents over a year ago, and sales were up 6.5%.  Other green building companies are expecting a market revival in 2012, as I wrote here about geothermal heat pump companies Waterfurnace Renewable Energy (TSX:WFI,OTC:WFIFF) and LSB Industries (NYSE:LXU).

With a great valuation and reviving market, now seems a great time to buy PFB stock.    Just use good-til-cancelled limit orders to avoid driving the price of this thinly traded stock up to more than you’re willing to pay for it.

Disclosure: Long PFB, WFI, LXU

This article first appeared on the author's Forbes.com Green Stocks blog.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.



was posted on AltEnergyStocks.com.


       

advertise here


Oil and Gas





Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Featured Companies











Oil and Gas


Search This Site


Subscribe to this Blog

Enter your email address:

Delivered by FeedBurner


Subscribe by RSS Feed



Twitter Headlines

Certifications and Site Mentions


New York Times

Wall Street Journal





USA Today

Forbes

The Scientist

USA Today

Seeking Alpha Certified

Twitter Updates