Initial coverage of Cascade Corp. (CASC) with the target price of $65.00 on December 29, 2012

Investment Opinion

This stock received my attention because it dropped without any significant reason.

Fundamental: The company is fairly or slightly undervalued, and the shareholders overwhelmly supports the buyout. The 2nd request from the Department of Justice will be met as the company has a revenue only $500M in manufacturing business.(PASSED)

Technical: It is very bearish for a buyout stock. Unless the buyout is fake, this premium is a good risk. (Negative)

Potential: The current maximum gain is 1.46%, the annualized gain is 20.6% if the deal can close on 01/24/2013.(PASSED)

Trading: The average trading volume of the last 3 month is 135K. (PASSED)

Position: The entry price should not be higher than $64.06. This is important to achieve the annualized gain.

General Market Overview

The index is bearish as the 30 day moving average of 1,410.27 is below 120 day moving average of 1,410.40. The last cross over happened on Dec 06, 2012 with the direction of down.

The intermediate trend is bullish as current price is above 30 day moving average.

If the index is breaking down and goes below 1,401.80, we should consider it as a short term sale signal.If the index is breaking out and goes above 1,448.00, we should consider it as a short term buy signal.

Investment Overview

Cascade Corporation engages in the manufacture and distribution of materials handling load engagement devices and related replacement parts under the Cascade name primarily for the lift truck and construction industries worldwide. It offers lift truck related products that are designed to handle loads with pallets and for specialized application loads without pallets; and specialized products, which include devices specifically designed to handle appliances, carpet and paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, and plywood, as well as boxed, packaged, and containerized products. The company also provides construction related products to enable loaders, backhoes, and rough terrain lift trucks to move materials, as well as for use on excavators and loaders for conventional and specialized ground engagement applications. Its customers include lift truck original equipment manufacturers (OEM), original equipment dealers, and distributors; and OEMs who manufacture construction, mining, agricultural, and industrial vehicles. The company sells its products to the end-users through the retail lift truck dealer distribution channel and to lift truck manufacturers as OEM equipment. It serves various industries, such pulp and paper, grocery products, textiles, recycling, and general consumer goods industries; and construction markets, including infrastructure, demolition, recycling, forestry, utility, and general construction. The company was founded in 1943 and is headquartered in Fairview, Oregon.

Cascade Corp.

2201 NE 201st Avenue

Fairview, OR 97024-9718

United States – Map

Phone: 503-669-6300

Fax: 503-669-6716

Website: http://www.cascorp.com

The number of shares outstanding of the registrant’s common stock as of November 15, 2012 was 11,199,400.

Technical Analysis

Before December 21, 2012, the buyout of this stock by Toyota Industrials looks like a done deal. However it dropped as rock after that. We need to find the reason behind it. If we believe the market is wrong about the reason after careful thinking, then it might be a good opportunity to catch some profits.

Financial Position

Revenue of 2009, 2010, 2011 are $314M, $409M, $535M respectively. Income of 2009, 2010, 2011, 2012 are $-38M, $21M, $63M respectively. The cash and cash equivalents and marketable securities totaled $25M. The stock equity is 344M. The goodwill and intangible are 88M. The latest analyst estimates are 109 cents per share, a.k.a. an income of 12M on the revenue of $133M for the quarter and 474 cents per share, a.k.a an income of 53M on revenue of $548M for the year. The revision of estimation is slightly positive.

Revenue of the latest quarters are 125M, 141M, 136M, 137M, 133M(estimated), while incomes are 13M, 15M, 12M, 13M, 12M(estimated).

Pricing Model

With the current price of $64.06, the speculative value  currently is 285M. Using the non-discount, non-growth model, the company would need 5.4 years to accumulate the value using its income.  As the company earns stable revenue and income, it is fair or slightly undervalued.

Events

12/21/2012

Dividend Channel Identifies Oversold Conditions For Top Ranked Dividend Stock CASC

The DividendRank formula at Dividend Channel ranks a coverage universe of thousands of dividend stocks, according to a proprietary formula designed to identify those stocks that combine two important characteristics — strong fundamentals and a valuation that looks inexpensive. Cascade Corp. (NYSE: CASC) presently has an above average rank, in the top 50% of the coverage universe, which suggests it is among the top most “interesting” ideas that merit further research by investors.

But making Cascade Corp. an even more interesting and timely stock to look at, is the fact that in trading on Friday, shares of CASC entered into oversold territory, changing hands as low as $64.15 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In the case of Cascade Corp., the RSI reading has hit 20.1 — by comparison, the universe of dividend stocks covered by Dividend Channel currently has an average RSI of 52.6. A falling stock price — all else being equal — creates a better opportunity for dividend investors to capture a higher yield. Indeed, CASC’s recent annualized dividend of 1.40/share (currently paid in quarterly installments) works out to an annual yield of 2.16% based upon the recent $64.85 share price.

A bullish investor could look at CASC’s 20.1 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. Among the fundamental datapoints dividend investors should investigate to decide if they are bullish on CASC is its dividend history.

In general, dividends are not always predictable; but, looking at the history chart below can help in judging whether the most recent dividend is likely to continue.

Dec 20, 2012

Toyota Industries Corporation Announces Extension of Cash Tender Offer for Shares of Cascade Corporation

KARIYA, Japan–(BUSINESS WIRE)–

Toyota Industries Corporation (Tokyo Stock Exchange: 6201) (“TICO”) today announced that Industrial Components and Attachments II, Inc. (“Purchaser”), an indirect wholly owned subsidiary of TICO, has extended its tender offer for all outstanding common shares of Cascade Corporation (CASC) (“Cascade”) for $65.00 per share (the “Offer”). The Offer was scheduled to expire at 12:00 midnight, New York City time, on Thursday, December 20, 2012. With the consent of Cascade, the Offer has been extended to expire at 12:00 midnight, New York City time, on Thursday, January 24, 2013, unless further extended. All other terms and conditions of the Offer remain unchanged.

In addition, TICO today announced that it has received a Request for Additional Information and Documentary Material (the “Second Request”) from the Antitrust Division of the Department of Justice (the “Antitrust Division”) with respect to the Offer. Cascade today informed TICO that it also received a Request for Additional Information and Documentary Material from the Antitrust Division and that it intends to cooperate with the Antitrust Division with respect to such request. As a result of the Second Request, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) during which the Antitrust Division is permitted to review the proposed transaction has been extended until 11:59 p.m., New York City time, on the 10th calendar day after TICO’s substantial compliance with the Second Request, unless such waiting period is earlier terminated. TICO expects to promptly respond to the Second Request, and to continue to work cooperatively with the Antitrust Division as it conducts its review of the proposed transaction in order to respond to and resolve expeditiously any questions the Antitrust Division may have. The Offer is now scheduled to expire at 12:00 midnight, New York City time, on Thursday, January 24, 2013. The transaction is expected to be completed immediately upon receiving regulatory approval from the Antitrust Division.

Computershare Trust Company, N.A., the depositary for the Offer, has advised TICO that, as of 5:00 p.m., New York City time, on December 20, 2012, 10,103,373 shares of common stock of Cascade had been validly tendered and not properly withdrawn in the Offer (including 343,885 shares tendered pursuant to notices of guaranteed delivery), representing approximately 90.2% of Cascade’s outstanding shares. Shareholders who have already tendered their shares of common stock of Cascade do not have to re-tender their shares or take any other action as a result of the extension of the expiration date of the Offer.

Nomura Securities is serving as exclusive financial advisor to TICO and White & Case LLP is serving as TICO’s legal advisor in connection with the transaction. BofA Merrill Lynch is serving as exclusive financial advisor to Cascade, and Miller Nash LLP is serving as Cascade’s legal advisor.

December 19, 2012

Basic guidelines

Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven’t materialized. Is the current inventory situation at Cascade (NYSE: CASC ) out of line? To figure that out, start by comparing the company’s inventory growth to sales growth. How is Cascade doing by this quick checkup? At first glance, OK, it seems. Trailing-12-month revenue increased 4.0%, and inventory increased 5.2%. Comparing the latest quarter to the prior-year quarter, the story looks decent. Revenue contracted 0.6%, and inventory expanded 5.2%. Over the sequential quarterly period, the trend looks OK but not great. Revenue grew 0.6%, and inventory grew 0.8%.

Advanced inventory

I don’t stop my checkup there, because the type of inventory can matter even more than the overall quantity. There’s even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it “positive inventory divergence.”

On the other hand, if we see a big increase in finished goods, that often means product isn’t moving as well as expected, and it’s time to hunker down with the filings and conference calls to find out why.

Let’s dig into the inventory specifics. On a trailing-12-month basis, finished goods inventory was the fastest-growing segment, up 6.2%. On a sequential-quarter basis, raw materials inventory was the fastest-growing segment, up 1.6%. Cascade seems to be handling inventory well enough, but the individual segments don’t provide a clear signal.

Disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.