Sandalwood maker taps SWF cash

The fourth investment by a Middle East sovereign wealth fund will be used to plant more trees.

TFS Corp, the world’s biggest sustainable sandalwood producer, says a Middle East sovereign wealth fund has invested $49 million to fund the plantation of an additional 595 hectares of sandalwood.

The fourth investment by the sovereign fund in TFS also includes $10 million that will be used by the fund to buy semi-mature trees in the existing sandalwood market. This will allow self-managed investment schemes to liquidate their investments in sandalwood.

Sandalwood plantations have attracted investors from around the world including some of the biggest US university endowment funds who are TFS shareholders. There is a huge demand for sandalwood from pharmaceutical and perfume companies as well as from consumers in China and India, who use sandalwood for religious purposes and burial rites.

Sandalwood fetches as much as $4,000 a kilogram for use in pharmaceutical products. A ton of sandalwood can sell for as much as $157,000 for use in furniture and beads.

Perth-based TFS has planted 7,600 hectares of sandalwood trees in Western Australia, Queensland and the Northern Territory since 1999. In the 12 months to June 30, the company had earnings before interest, tax, depreciation and amortisation of $51.6 million. Its net profit was $21.3 million and TFS paid a three cent dividend, representing a four per cent yield.

The stock closed at 78 cents, up 1 cent.

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