TFC - TFS Corporation - Aussie Stock Forums

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  1. #1

    Post TFC - TFS Corporation

    Can't find a thread on this so I will start one

    TFC is a Managed Investment Schemes (MIS) company that grows Indian Sandalwood trees in Western Australia. TFC mostly grows trees for investors (called growers), and TFC also grows some trees for itself. Indian Sandalwood is an endangered species and highly priced for its oil, which is used in famous perfume brands such as channel and Christian Dior, incense, and woodworking. The number of natural grown sandalwood tree is diminishing fast due to illegal logging activities and the price of Sandalwood tree has been going up at an aggregated rate of more than 20% a year for 5 consecutive years. Currently Indian Sandalwood is worth more than $100,000 a ton.

    TFC’s deal (simplified model)

    Each unit of land (lot) is 1/6 ha. A one off fee of around $10,000 is paid by the grower for each lot. Then, growers pay around $1200 management/leasing fee to TFC annually. It takes 13 years for the tree to mature and be harvested. The expected return (in future dollars term using TFC’s own estimation is around $200,000 per lot). Using an interest rate of 8%, we get a NPV of over $50,000 for every lot you invested.


    TFC reported a net profit of 12 cents EPS for 2007, EPS has been going up for 3 consecutive years. This places the company at a modest PER of just 8, before the recent issue of shares to acquire more land to grow trees. After the recent issues, the PER is just 9.1. Given the simple business model of TFC, it is clear that the limiting factor of earning potential is how much land they can lease out every year, because the one off fee is the bulk of the pie. This is not currently a problem at all as TFC just acquired Kingston Rest Property, which provided a dam and 2400 ha of land suitable for growing trees. In 2007 TFC closed its project oversubscribed at more than 525 hectares. So the new land acquisition will at least be able to supply land at the same rate for 4 additional years. TFC also pays 5 cents per share dividend, which is a little more than 5%.

    Potential upsides

    Carbon Credits (which I think is not currently taken advantage of)

    On one lot, being 1/6 of a hectare, which is around 1666sqm^2, you can fit roughly 40 x 40 trees in, assuming a gap of 1m in every direction between trees. That is around 1600 trees. A grown tree can absorb 48lb of carbon dioxide, 1600 trees can absorb around 34 tons of carbon dioxide. The lease agreement says the growers only own 50% of the carbon credits. Companies like COZ charge $16 dollars per ton of carbon dioxide per year. One unit of land would thus potentially generate $544 a year, of which $272 would go to TFC. This figure would go over a million for over 1000 hectares every year.

    Snap Shot

    184M shares, of which directors own over 47M
    SP = $0.960 (30th Oct 2007)
    Market cap of 176M
    2007FY net profit of 19M
    Director recently spent over 170k buying shares at 99 cents
    9 Million Cash
    21 Million Debt
    Owns lots of trees and land

  2. #2

    Default Re: TFC - TFS Corporation Limited

    Reading a sandalwood prospectus will give you the tree density which becomes a major factor in your CO2 calcs. Personally, I cannot see how your estimated allocation of only 1m2 per tree (10,000/ha) would be feasible.

  3. #3

    Default Re: TFC - TFS Corporation Limited

    Hi Sainter,

    Thanks for the interest and sorry about the calculation. I understand that the number of Sandalwood is far smaller, in fact I think it's around 500-600 per hectare. However, if I am not wrong you need to have host trees to assist the growth of Sandalwood. I didn't find anything from TFC's prospectus but managed to find some stats here http://www.wasandalwood.com/download...dfa72cf9049ca3
    Please note this is WA sandalwood.

    Sufficient host trees and sandalwood seeds will be planted to
    provide for an average of 625 sandalwood trees per hectare and
    1875 host trees per hectare after the first 2 years from planting.
    So I think the correct number of trees should be around 2000-2400 trees per hectare, not 1600 per unit, that's just grossly inappropriate. Sorry about that.


  4. #4
    The Contrarian Averager So_Cynical's Avatar
    Join Date
    Aug 2007
    Sydney - Muntinlupa

    Default Re: TFC - TFS Corporation Limited

    There is huge potential for Indian sandalwood in the Aussie tropics.

    When growing rare timbers its really about the timber and
    the carbon benefits are just a side affect, and in the big
    economic picture are somewhat irrelevant.

    Sandalwood is a parasite tree and rather difficult to grow
    and slow growing...also 1 of the most valuable timbers
    in the world.

    good luck to those holding.

  5. #5

    Default Re: TFC - TFS Corporation

    wise-owl.com commenced coverage of TFC today 12Mnth target of 1.65, currently trading round 1-1.05
    "Valuation offers compelling upside. Wise-owl.com have a $1.65 per share DCF valuation for TFC, which is substantially above current levels. Our model is based solely on MIS sales, and excludes future harvest proceeds which are expected to be the main earnings driver from 2013 and suggests upside potential at current levels to our valuation."

    I got in bout a month ago and think this one could be a goer short term and long term its prospects are astounding.

  6. #6
    emu2's Avatar
    Join Date
    Mar 2005
    Western Australia

    Smile Re: TFC - TFS Corporation

    I think & bet that this one has potential of becomming a very nice income producing long term Blue Chip investment. Track record to date "Classic". Ciao e.

  7. #7

    Default Re: TFC - TFS Corporation

    I am seriously considering buying some tfs corporation shares in the near future. The fact that they are growing the most expensive wood in the world is a fairly compelling argument.
    Apparently their wood is used extensively in the hindu religion, not bad to have the demand of over 1 billion people.
    It is also nice they have started paying a dividend
    Anyone else have any views on their long term profitability?

  8. #8

    Default Re: TFC - TFS Corporation

    Currently, profitability relies on selling MIS investments. This ultimately relies on them being able to grow trees in which sufficient sandalwood oil forms. The jury is still out on that feat-a case of wait and see. If it comes good, you're laughing, but if it doesn't....
    I do not hold, but I own several Indian sandalwood lots purchased through ITC.

  9. #9
    emu2's Avatar
    Join Date
    Mar 2005
    Western Australia

    Default Re: TFC - TFS Corporation

    This stock is a potential future "Blue Chip" & deserves real research & a busy thread . Prospering high value products & partnerships. Profitable & undervalued. ! e2

  10. #10

    Default Re: TFC - TFS Corporation

    The next report from the company will be crucial to its future, IMO.
    At present, its labouring under the MIS cloud which has claimed Timbercorp and Great Southern Plantations. TFC will have to demonstrate clearly that they don't have the same problems, given their own MIS involvement.
    In their favour is their low borrowings and plans to be debt free by the end of 2009. If they are confident and convincing on that score I would expect the SP to firm and profitability to increase but I wouldn't quite put them in the "potential blue chip" class just yet.

  11. #11

    Default Re: TFC - TFS Corporation

    Looks like a nice entry point. Rock solid support at $1 and plenty of people buying, see chart showing increased in volume.

    P/E of 5.4
    Dividends - Final 3.00cents 100% franked ex 26 Nov, 09

    Positive article out yesterday
    Attached Images

  12. #12

    Default Re: TFC - TFS Corporation

    I've been wondering how this carbon trading business affects TFC, assuming that something gets agreed at some point.

    Presumably, TFC might be entitled to carbon credits of some value while the trees are growing but would incur a liability when the trees are harvested. Does anyone have a handle on this?

  13. #13

    Default Re: TFC - TFS Corporation

    One further thought on TFC.

    They have a Share Purchase Plan current. $15,000 per shareholder at $1 or weighted average of the SP in the last five trading days before the issue closes on 2 Oct, if that price is lower.

    A big incentive for the company to see the SP remain above $1 leading into next week's trading.

  14. #14

    Default Re: TFC - TFS Corporation

    Quote Originally Posted by oldblue View Post
    I've been wondering how this carbon trading business affects TFC, assuming that something gets agreed at some point.

    Presumably, TFC might be entitled to carbon credits of some value while the trees are growing but would incur a liability when the trees are harvested. Does anyone have a handle on this?
    I think they will always be carbon positive, because of replanting and planting in new areas.

    But I do wonder how the system works...

    is a full grown tree worth more carbon credits?

  15. #15

    Default Re: TFC - TFS Corporation

    Significant volume today, over 1mil shares traded. Last time since this stock has seen this much volume was in Nov 08 and in Feb 08.
    Attached Images

  16. #16

    Default Re: TFC - TFS Corporation

  17. #17
    Hedders's Avatar
    Join Date
    Apr 2009
    Central Coast NSW

    Default Re: TFC - TFS Corporation

    Not sure why this stock is getting sold down at the moment. It's 5c below the SPP offered last month. The balance sheet looks good and it keeps going in the right direction. I hope the valuation of circa $2.70 comes true, as quoted in Wise Owl!

  18. #18

    Smile Re: TFC - TFS Corporation

    Just a note of warning on a stock like this........

    I recently ran the ruler over it and every annual report since floating.....TFC is lot too much like Timbercorp for me to have any idea what its worth....I can't value it

    TIM had growing earnings and growing net tangible assets almost every year untill it was supposedly bankrupt

    TIM's flaw was that it relied on regular capital infusions to grow and once the stock price died after gov regulation.......it was a self fulfilling prophesy as the banks decided they needed their money back.......and now we are selling almond plantations at half price to Singapore!!!!!!!!!

    In short, TIM had insufficient ongoing cash flows, that once government killed orchard creation.......the banks decided the pyradmic scheme was off........TFC relies even more on up front money than TIM did

    My point is that TFC runs off exact same model albeit.......appears with better margins

    Buyers of this stock need to realise where each years growing profits come from..........

    Simply, TFC derives almost all its profit each year by writing new shares, buying plant and equipment and being paid to establish an 'orchard' for investors.......and they have been making greater profits by doing more each year.

    One can see the risk with this model..........I don't think one of TFC's trees have been harvested yet.........and then there is the regulatory risk......

    It just takes on year, for whatever reason, TFC stops planting........and then its a basket case............yes, they have diversified a little, but not near significantly......the growth from 20cents to 90cents over last few years have essentially been fuelled by writing shares at higher prices!!!! That's what Soros called 'reflexivity'

    Just an end note: It's still possible TFC could be a killer company......for those who analyse income statement a bit...........I'm not sure if I've ever seen a greater profit/revenue margin............it has been getting worse over the years and continues to slide...........but it does suggest TFC does very little work for a big payoff...........the killer risk is just that one year they can't plant or sell 'investment product'

    Personally, as a rule I will not touch a company that continually writes a heap of shares........there are exceptions to every rule......but with so many killer stocks out there at moment, this one was easy to turn down......Best of luck to all
    Big Stocks Don't make Big Stock Moves---Lynch

  19. #19

    Default Re: TFC - TFS Corporation

    Cash‟ Revenue
    FY06 FY07 FY08 FY09 FY09 v FY08 % Change
    ($M) 20.73 34.65 56.82 78.35 +33.2%

    As with all stock there is an element of risk and your post has highlighted some of them. Rainmaker2000 please give some evidence to support you claims
    From what I can seen there have been about ~60mil new shares created since 2006, the majority in the recent placement of 28mil and $1.
    So I don’t see how they can be making the sort of money show above from creating new shares. The maths doesn’t add up.

    Some good points taken from the ‘TFS SUCCESSFULLY COMPLETES $28.0M INSTITUTIONAL PLACEMENT’ ann
    • TFS’s first planting was in 1999 and it now manages the largest area of Indian sandalwood plantation in the world, with 1,750 hectares planted. TFS has a land bank of over 4,000 hectares
    • Its heartwood currently trades for in excess of A$100,000 per tonne on average, having risen at a compounding rate of over 21% per annum over the past 17 years.
    • TFS was the winner of the 2006 State Regional Water Award.
    • TFS was recently ranked as an industry leader in ethical and sustainable practices by Oekom Research, a leading international ratings agency.3
    • Plus alot more ++ to many to post, this was from one ann.

    it is my view that someone is accumulating at below $1 hence the increase of volume and seen in my above graphs.
    Disclaimer I hold . DYOR

  20. #20

    Default Re: TFC - TFS Corporation

    As I thought someone is playing funny games with this stock. Seems to be someone wanted to transfer their holding from one account to another(but the trade wasn't a cross trade). Any other ideas?

    04:10:13 PM,0.935,1,0.94,,
    04:10:13 PM,0.935,9906,9262.11,,
    04:10:13 PM,0.935,12736,11908.16,,
    04:10:13 PM,0.935,21229,19849.12,,
    04:10:13 PM,0.935,2500,2337.50,,
    04:10:13 PM,0.935,25000,23375.00,,
    04:10:13 PM,0.935,3000,2805.00,,
    04:10:13 PM,0.935,628,587.18,,
    04:10:13 PM,0.935,25000,23375.00,,
    04:10:13 PM,0.935,25000,23375.00,,
    <=== the 600k shares
    03:58:58 PM,0.950,1090,1035.50,,
    Attached Images

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