Tree Shake, page-12

More from AFR with a buy recommendation

TFS Corp, the world's biggest Indian sandalwood plantation business, is a compelling investment opportunity, "with considerable upside to our valuation,"  Moelis & Company analyst Benjamin Atkinson writes in a research note to clients.

Atkinson notes recent corporate activity involving a $65 million capital raising and subsequent purchase of externally owned plantations has positioned TFS to own and control a significant portion of the coming years' harvest.

"Despite a successful (and oversubscribed) capital raising to de-risk the future supply of oil, the share price has recently come under pressure," he adds. "We believe there is significant upside from current levels."

Atkinson has a "buy" recommendation and $3.15/share price target on the stock, representing an estimated 149 per cent-plus total return.

TFS chief executive Frank Wilson told The Australian Financial Review this week that he is bullish about yields, noting the third harvest, now underway, is looking far more promising and future ones even more so.

Wilson added that supply will continue to be constrained by the fact that most of the global stock is illegally harvested from Indian native forests, which is not favoured by increasingly environmentally-conscious consumers. As for farming, sandalwood is hard to cultivate. The plant is a parasite, so host trees also need to be grown.


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