An Updated Analysis, page-11

I notice that there are three updated analyst reports now available on the TFS website. The Cannacord one is the most thorough and useful for me.

In it, they confirm that the logistical issue with the Middle East customer is now resolved, and heartwood was delivered to the customer in February. I believe that the logistical issue with the Chinese customer was fixed previously. This is good news for sales this half.

Some other relevant points:

1. Cannacord expects the equity free cash flow yield to increase from 4.0% in FY17 to 7.1% in FY18 to 9.0% in FY19. IMO, TFS is rapidly turning into a major free cash generation machine well in advance of the major kick up in harvests from FY22 onwards. I believe that the market will start to reward shareholders for this high level of FCF by FY18 at the latest.

2. Cannacord estimates the cost of land acquisition and irrigation is around $22,500 per hectare. Therefore it costs TFS around $34M for the average annual plantings of 1,500 hectares. TFS will no longer need to spend this capital when they get to their full plantation size and can recycle 1,500 hectares each year in new plantations (not sure if they need to leave it fallow for a year in between).

3. Cannacord's valuation assumes that TFS will not be planting any more forests after FY25, meaning no more establishment fees, and declining management fees as the forests are harvested and not replaced.

I believe there is no reason why TFS will stop planting in FY25, when they have the land and irrigation installed, and there is ongoing demand for their products. If so the present valuation should be even higher than calculated by Cannacord. Or am I missing something?