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070424 Deutsche Bank Report - Rayonier's 1Q in 100 Words

Deutsche Bank - Equity Research

Rayonier {Ticker: RYN.N, Closing Price: USD 44.00, Target Price: USD 55.00, Recommendation: Buy}.

Above expectations, driven by land sales volume. Reported $0.45. DB @ $0.27 & FC @ $0.30. Comps: 4Q06 = $0.59, 1Q06 = $0.30. More rural land sales closed in 1Q than expected, but no change to annual guidance. Pos's: Impressive y/y improvement in Performance Fibers, nice volumes & prices for rural acreage. Neg's: Wildfires in SE GA impacted 26K RYN acres to date.

Timber: Late '06 acquisitions boosted vol's. EBIT: $26MM, 4Q06 = $19MM, 1Q06 = $24MM. NW vol's helped by strong export market. Loss on GA fire = $5-7MM on book value, presumably much more on market value. Expectations on '07 prices: down 2-3% y/y in NW, and flat/up y/y in SE, due to mix improvement from acquisitions.

Real Estate : Mixed. EBIT: $15MM, 4Q06 = $30MM, 1Q06 = $11MM. Rural land demand still strong - sold about 6K acres at about $2,900/acre. Demand for development land now soft in some FL counties. Sold 123 acres of commercial land at almost $30K/acre.

Performance Fibers : Even stronger than expected. EBIT: $27MM, 4Q06 = $28 (net of $5MM tax gain), 1Q06 = $10MM. Cellulose Specialties prices up 7% q/q and 11% y/y. Fluff prices up 3% q/q and 7% y/y. Mix also improved, with more CS & less fluff.

Other : (1) Wood products EBIT = $(3MM), (2) Other operations EBIT = $(1MM), (3) Still guiding '07 to be "comparable" to the $1.99 of '06.

Change in View? Not really. Performance Fibers appears to be firing on all cylinders, and rural land demand remains solid. The cyclical slowing on development land does not change our long-term outlook. RYN remains one of our favorite long-term value plays. No change to Buy rating, $55 price target, or annual estimates.