Skip links

SCAB – Fudging Your Lumbers

January 25, 2024 – Viceroy are short Svenska Cellulosa AB (STO:SCA-B)(“SCA”).

SCA has massively inflated its forest assets on paper. Its valuation methodology has relied on short-term price fluctuations, interest rate fluctuations, and mark-to-market assumptions for numerous unrealistic inputs to massively inflate SCA’s forestry assets. In this report we highlight the following concerns”

  • We believe SCA has vastly overstated the volume of its forest assets, which is the primary biological volume input against mark-to-market sales data.
  • SCA’s DCF valuation is extremely sensitive to its discount rate because its discount rate is extremely low at 2.65%, even in 2022 when the Swedish policy rate ended at 2.5%.
  • SCA’s mark-to-market approach uses market value transaction data from sales of, mostly, non-productive land (i.e. hobby, environmentalism, gaming).
  • SCA appears to have aggressively overharvested inventory and has brought forward expected forestry volume yields, possibly to justify aggressive valuations on mega long-term asset cycles. SCA has been reprimanded for overharvesting and early-harvesting violations on various occasions.
  • SCA and other Swedish operators face several environmental threats with new research showing widespread damage to younger forests throughout the country.

Viceroy’s investigation is ongoing, and we anticipate producing further SCA reports, as well as a review of SCA’s 2023 results, in the near term.

Important Disclaimer – Please read and acknowledge before continuing

Viceroy Research LLC are an investigative financial research group registered in Delaware, USA.

Our research reports have been prepared for educational purposes only and expresses our opinions. Our reports and any statements made in connection with them are the authors’ opinions, which have been based upon publicly available facts, field research, information, and analysis through our due diligence process, and are not statements of fact. All expressions of opinion are subject to change without notice, and we do not undertake to update or supplement any reports or any of the information, analysis and opinion contained in them. We believe that the publication of our opinions about public companies that we research is in the public interest. We are entitled to our opinions and to the right to express such opinions in a public forum. You can access any information or evidence cited in this report or that we relied on to write this report from information in the public domain.

To the best of our ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stocks covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer. We have a good-faith belief in everything we write; however, all such information is presented “as is,” without warranty of any kind – whether express or implied.

In no event will we be liable for any direct or indirect trading losses caused by any information available on this report. Think critically about our opinions and do your own research and analysis before making any investment decisions. We are not registered as an investment advisor in any jurisdiction. By downloading, reading or otherwise using our research reports, you agree to do your own research and due diligence before making any investment decision with respect to securities discussed herein, and by doing so, you represent to us that you have sufficient investment sophistication to critically assess the information, analysis and opinions in this report. You should seek the advice of a security professional regarding your stock transactions.

This website, all documents contained herein or any information herein should not be interpreted as an offer, a solicitation of an offer, invitation, marketing of services or products, advertisement, inducement, or representation of any kind, nor as investment advice or a recommendation to buy or sell any investment products or to make any type of investment, or as an opinion on the merits or otherwise of any particular investment or investment strategy.

Any examples or interpretations of investments and investment strategies or trade ideas are intended for illustrative and educational purposes only and are not indicative of the historical or future performance or the chances of success of any particular investment and/or strategy.

You should assume that the authors have a direct or indirect interest/position in all stocks (and/or options, swaps, and other derivative securities related to the stock) and bonds covered herein, and therefore stand to realize monetary gains in the event that the price of either declines.

The authors may continue transacting directly and/or indirectly in the securities of issuers covered herein for an indefinite period and may be long, short, or neutral at any time hereafter regardless of their initial recommendation.