According to TIM’s 2006 Annual Report, forestry made about 29% in terms of its whole MIS sales revenue, and about 15.5% in terms of MIS profits (page 4, http://www.timbercorp.com.au/userdocs/1/corporate%20shareholders/documents/2006%20Timbercorp%20Annual%20Report.pdf )
These numbers may look bad, however, they can be misleading if you use them blindly in assessing TIM’s value after the regulation changes.
This is because about half (50%) of TIM’s revenue/profit is from “recurring income”, which is from the non-forestry business. These non-forestry projects, (say almond and olive oil), have been in a horrific growth state (30-50% p.a.) in the past say 5 years, and all these projects need 3-5 years to bear fruits to produce “recurring incomes”. So TIM’s “recurring income” will still keep at a very high double-digit growth rate (~30%?) in the next 3-5 years even if the new non-forestry projects have been completely cut off after 1/7/2008.
In FY2008, if TIM would do nothing and the new forest project would be kept at the same size as before, then TIM should be able to keep ~80% of the revenue/profit.
By comparison, GTP’s non-forestry revenue will reach 50% this year (see my post of #1549624 at http://www.hotcopper.com.au/post_thread.asp?fid=1&tid=425568#1549624). But because all its non-forestry projects were hastily developed in the past 1-2 years, GTP’s “recurring income” is virtually nil. If GTP would also keep the new forestry project at the same size as before, then it would only be able to keep ~50% of the revenue/profit.
So, judging by the above comparison, TIM is actually less affected by the regulatory change and in a better position than GTP (price dropped more though).
Of cause, TIM and GTP would both expand their forestry project dramatically in 2008, but it would be more difficult for GTP due to its huge size.
TIM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
