TFS Corporation Limited
Funding model all but secured
TFC refinances Notes
TFC has announced that it has successfully refinanced its USD200m Notes. The new
Notes: have been increased to USD250m; have had maturity extended to August 2023
(from July 2018); and, have an interest rate of 8.75% (from 11.0%). The refinance will
come at a cost of USD8m as a result of a prepayment penalty, and the new Notes have
a non-call period of three years. We had previously forecast a 1H17 refinance of the
Notes to USD235m at 8.0% but believe the increased size of the debt capacity –
combined with $68.5m in fresh equity raised recently – will alleviate any potential
balance sheet pressure that TFC could have had between now and its very large Indian
Sandalwood harvests from FY22E onwards. TFC is looking to repurchase Retail MIS
plantations over the next four years and has $82m potential put options over the next
3.5 years that could be exercised to them (i.e. TFC would need to buyback the
plantations). Offsetting some potential cash outlays are TFC’s options outstanding
($70m with exercise date and price of July 2018 at $1.28ps respectively).
Next catalyst is production uplift
Now that TFC’s funding capacity is secured, in our view, we believe the next potential
positive catalyst for the stock is confirmation of an expected 10-fold uplift in production
from the current harvest. A production estimate is expected at TFC’s FY16 results
announcement in late August.
Equities
Australia
Agriculture
12-month rating Buy
12m price target A$3.25
Price A$1.51
RIC: TFC.AX BBG: TFC AU
Trading data and key metrics
52-wk range A$1.85-1.11
Market cap. A$0.49bn/US$0.37bn
Shares o/s 324m (ORD)
Free float 86%
Avg. daily volume ('000) 656
Avg. daily value (m) A$0.9
Common s/h equity (06/16E) A$0.67bn
P/BV (06/16E) 0.7x
Net debt / EBITDA (06/16E) 4.3x
EPS (UBS, diluted) (A$)
UBS Cons.
06/16E 0.083 0.055
06/17E 0.087 0.079
06/18E 0.126 0.100
Jordan Rogers, CFA
Analyst
TFC Price at posting:
$1.63 Sentiment: Hold Disclosure: Held
