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836,000 Reasons to be Bullish on TFS Corporation

836,000 Reasons to be Bullish on TFS Corporation
Management expects the 2016 harvest to be ten-times the 2015 harvest
Mar 04, 2016 By Simon Tags: TFC

The director of TFS Corporation (ASX:TFC) Mr. Frank Wilson recently purchased 836,000 shares on-market for a total consideration of $1.45 million. This share purchase was made after Mr. Wilson presented an upbeat financial result for the first half of FY16 on 26 February 2016 and stated that the company is "extremely well placed" to meet the milestones set for the financial year.

1H16 Result

The world’s largest Indian sandalwood plantation owner lifted its half-year profit by 23% on the back of a 17% rise in cash revenue. Cash EBITDA rose 29% as overall plantation sales were up 50% underpinned by strong demand from all investor groups. The cash balance also rose from $30 million to $52 million.

New Supply Agreements with China and India

TFS has signed multi-year agreements with Chinese and Indian buyers to supply its harvests at US$4,500 per kg of oil. Moreover, the company also has contracts in place with Nestle-owned Galderma and Lush Cosmetics. As a result of these agreements, all of the 2016 and 2017 harvest (approximately 300 tonnes of heartwood) has already been forward sold.

The 2016 harvest is set to commence in May 2016 and Mr. Wilson anticipates the proceeds of this harvest to generate attractive cash margins which will further uplift the company’s financial performance.

Management Expects 'Transformational Growth'

Mr. Wilson, the co-founder and CEO of TFS, has been consistently investing in the company’s shares over the past few years. While there may be many reasons for a director to purchase the company's shares, the bottom line is that directors investing in their business are confident in the company’s future growth trajectory. This is further supported by management’s recent comments, stating that the company is set to achieve ‘transformational growth’ in FY17 as the 2016 harvest is anticipated to be ten-times higher than the 2015 harvest.

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Simon Author: Simon Mar 04, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian. Simon worked for Wise-owl from 2013 until January 2020.

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