TFC buys back MIS sellers at the book valuation. This is based...

TFC buys back MIS sellers at the book valuation. This is based on a $US 2,800 per kg of oil equivalent and 12% discount rate (from the note to the finacial accounts). However, the market price for sandalwood oil (on smallish volumes) is $US4350 to $US4,500 per kg. TFC has presold its share of the 2016 and 2017 harvest at $US4,500 per kg.

I suspect the MIS sellers are distressed sellers and the uninformed sellers. Also some MIS sellers may be managing their tax liabilities by spreading their sales over 2 or more financial years. Anyway, TFC is purchasing these MIS lots at the book value of $US2,800 per kg.

I suspect the capital raising is to develop and plant more trees owned by TFC (or repay some debt) rather than purchasing MIS lots.

TFC stated in an investment presentation it's goal is to own as much trees that its cashflow will permit. This is signficant. It is stating it is more profitable to own the trees than to be a manager of other's trees. Thus, TFC management are confident on the future oil price, otherwise why take the risk of being an owner of the trees.