Citi Waits For The Right Entry Point In Rayonier, A 'Pure Play' Timber REIT

Rayonier Inc. RYN is a timberland REIT with assets in the U.S. and New Zealand. The company recently announced the addition of a Marcato Capital Management executive to its board.

The Analyst

Citigroup analyst Anthony Pettinari initiated coverage of the shares of Rayonier with a Neutral rating and $37 price target.

The Thesis

Rayonier is "the most 'pure play' of the four publicly traded timber REITs," Pettinari said in a Thursday note, with 77 percent of its last 12 months EBITDA drawn from timber segments versus a 54-percent average among the peer group. (See the analyst's track record here.) 

Pettinari said he likes Rayonier's "best-in-class" southern timber portfolio and exposure to Asian export markets. The Florida-based trust holds 2.6 million acres of timberland. 

Given the recent outperformance of the stock — which is up 19 percent over the past year compared to a 14-percent decline in the REIT Index and a 4-percent gain by  Weyerhaeuser Co WY — Citi said it would wait for a more attractive entry point and greater conviction in southern log price improvement.

Among the timber REITs, Citi said it prefers Weyerhaeuser.

The Price Action

Rayonier shares are up about 19 percent over the past year.

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