Western Forest Products Inc., the largest lumber producer on British Columbia’s coast, rose the most in almost two months after it announced plans to buy back shares and pay a dividend for the first time.
Western, based in Duncan, British Columbia, rose 4.7 percent to C$1.34 by the 4 p.m. close of trading in Toronto today, the biggest one-day gain since May 8.
Recovery in the U.S. housing market has boosted forestry companies over the past 12 months. Western has advanced 60 percent over that time, trailing the 73 percent average increase of Western Forest’s nine Canadian peers, according to data compiled by Bloomberg..
The C$802.6 million ($764 million) company will buy back C$100 million in shares and begin a quarterly dividend of 2 cents a share starting in the fiscal third quarter, it said in a statement late yesterday.
“I still see this as an undervalued story,” said Mark Kennedy, an analyst at CIBC World Markets in Calgary. Western has paid off all its debt and is returning capital to shareholders, he said.
While companies such as Canfor Corp. and West Fraser Timber Co. Ltd. harvest trees inland, Western has rights on Canada’s west coast, meaning it cuts a wider selection of trees used for niche markets like fine trim and molding, said Kennedy.
“They’re the largest cedar producer in North America and cedar is more geared to repair and renovation activity as opposed to new housing activity,” he said. Kennedy has a price target of C$2 over the next two years, as the renovation sector picks up following new house construction.