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Selling Off The Paperweights?



Paper and forest-product stocks are finally finding their way out of the woods, but they're not in the clear yet. Red ink continued to hamper the industry in 1993, and the outlook for 1994 remains iffy. But with the resurgence of mergers, "certain paper and forest-products stocks may just be the right thing to own at this point," says Kazi Hasan, a veteran paper and forest-products analyst.

Many of these companies will have to sell entire divisions, maintains Hasan, a senior vice-president at Ray Dirks Research. "In most cases, the only way out for these companies is to spin off some of their assets to underscore the market's undervaluation of their true worth." he says. Despite strong cash flow, most forest-products companies are steeped

in heavy debt, he notes. And they have nothing much to show by way

of profits. So Hasan has been buying into Champion International and Boise Cascade.

"Asset-rich Champion and Boise now have their backs to the wall, and like it or not, spinoffs are the quick medicine for what's ailing them." Hasan says Champion, whose stock is at 32, is worth 60 based on its pulp, newsprint, and printing-paper units. Boise, now at 22, is worth twice its selling price.

Hasan sees earnings of 50 and cash flow of $7.50 a share for Boise in 1994, vs. a $3 loss in 1993. He also expects Champion to post a 1993 loss of $2, but he sees 1994 earnings of $1.20 and cash flow of $6.50.GENE G. MARCIAL

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