TFS to Commence Buy Back of Sandalwood Plantation
TFS has made offers to acquire roughly 40 hectares of Indian sandalwood from growers of the TFS2000 project.
The world’s largest owner and manager of Indian sandalwood plantations, TFS Corporation Limited (ASX:TFC) has announced the launch of its plantation buy-back program. TFS will commence the program with the buyback of 40 hectares of Indian sandalwood which will be harvested in June.
The company has made offers to acquire roughly 40 hectares of Indian sandalwood from growers of the TFS2000 project. This forms the first leg of the program, as TFS targets to buyback 221 hectares, which are set to be harvested between 2016 and 2022. The offer price has been determined using the same methodology as in the company’s audited financial account and is based on the book value of the plantations as at 31 December 2015.
TFS States that Investors “Tripled” Their Money; Buyback to Ensure Supply
TFS has offered $357,985 per hectare to investors of the project, approximately three times the invested capital (excluding taxes). Growers with more than 30% of the woodlots in the 2000 Project have formally accepted the buy-back offer.
TFS Managing Director Frank Wilson commented on the buy-back proposal: “These offers provide growers with a definitive and highly attractive return. With the majority of investors generating returns which are more than triple their invested capital this proves that TFS’s Indian sandalwood plantations are a genuine and rewarding investment class.
Frank Wilson is confident that the buyback not only rewards shareholders but also directly benefits the business. He said: “As well as providing growers with attractive returns, the purchase of the plantations provides TFS with certainty of future supply to satisfy increasing demand from our pharmaceutical, fragrance and Chines and Indian wood markets.”
Most of the growers in the project have postponed their annual management fees and are anticipated to earn a 3.4 times return on their investment, yielding an annualised Internal Rate of Return (IRR) of 9.9%. Those investors who pre-paid their management fees are expected to achieve 3.2 times return, while those who paid their management fees on an annual basis are set to earn 1.8 times return.
TFS is funding this buy-back via a $65 million equity raising announced last month.
TFC has risen nearly 4% since the announcement, and was last traded at $1.52 as at 12:30 pm (AEST).
Author: Kaivalya Kandarpa
May 06, 2016
Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.