Someone wanted the Wise Owl report??The recomendation summary...

Someone wanted the Wise Owl report??

The recomendation summary is..

Spec Buy Price of $0.56+
Target Price of $0.90


Company Background
TFS Corporation Ltd (TFC) is engaged in management and operation of forestry plantations and the provision of finance. Its principal activities include promotion of sandalwood managed investment schemes, management and maintenance of sandalwood plantations, ownership and leasing of land, and ownership of sandalwood plantations. The company grows Indian sandalwood plantations on behalf of growers and itself. TFC currently has ownership of 850ha of plantation land in Kununurra, Western Australia. Sandalwood is used mainly in the fragrance industry such as the perfume Chanel No 5.


Investment Summary
TFC is in a high growth industry which is experiencing supply side constraints and rising demand. After years of investment into their land in W.A. the growth is starting to show. TFC operates in an industry with high barriers to entry. With a diminishing Indian industry TFC is poised to fill the gap in supply. The sandalwood grown by TFC is of high quality and high oil yield and future competitors might find it hard competing with TFC to recapture market share lost by Indian growers. The company has an average plantation lifespan of 14 years and first harvest is expected in 2012. The company has spent more money on marketing over the recent year which has paid of with higher revenue.

A full time R&D department has also been set up. The company has developed a silviculture technique which will increase the speed of sandalwood planting and survival rates and will also reduce costs of plantation maintenance. TFC is also adamant to adhere to environmental policies. The plantations are very environmentally friendly and a recent water recycling project has begun.

The risk to the business is unfavourable weather such as a cyclone striking the region. Since sandalwood prices are in US dollars the company is also exposed to foreign currency movements. We see good value in TFC with the added bonus of it being a relatively defensive play. We rate TFC as a 'spec buy’ for growth.