Micro Cap Ideas

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>>> Orchids Paper: Toilet Paper Never Looked So Dirty - Bankruptcy By The End Of The Year?


Seeking Alpha

Dec. 10, 2018


https://seekingalpha.com/article/4227402-orchids-paper-toilet-paper-never-looked-dirty-bankruptcy-end-year



Summary

Each 2018 quarter, Orchids Paper (TIS) has had a consecutively worse financial performance.

For the past two quarters, Orchids' gross margin has been almost 0%, while its SG&A and interest expense have ballooned to unsustainable levels.

We believe the banks won't extend Orchids deadline for a sale of its assets, and it will file for Ch 11 bankruptcy by the end of the year.

TIS recently rose over 100% on insignificant news, which we believe creates a good short opportunity.

Next quarter, marketing for new customers will be even harder for Orchids as competing ultra-premium tissue manufacturing facilities will begin production.

We Predict Orchids Paper Will Go Bankrupt Before The Year Is Over
Source: orchidspaper.com

We believe Orchids Paper (TIS) is going bankrupt, and it will happen soon, likely before the new year. The recent bounce two weeks ago on relatively insignificant news provides some room to short. We believe the equity is worthless as we show in this report.

The hygienic paper industry has been the worst it has ever been for producers for a couple of years now, and it keeps getting worse for Orchids Paper. Prices have come down, while costs have risen. For example, the price of hardwood pulp, an ingredient in tissues and toilet paper, has surged about 60% since late 2016. We don't believe Orchids shareholders will come out of this tough period with any value in their shares.

In an article from tissueworldmagazine.com published on 7/2/15 it states:

The brand producers - P&G, K-C, and GP - compete strongly with TAD products. But other smaller players - Clearwater, First Quality, and Kruger - started up four new TADs in the last four years to compete more strongly in the ultra and premium categories.

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