John, Good summary of the risks. I throw the following into the mix:
John's Risk 1: I suggest management is confident it can maintain MIS and institutional sales because it increased its establishment fees by 28% in FY2016.
Additional risk / negative impact: The volume of harvest will decline from the 2016 harvest to the 2020 harvest. However, this is offset by increasing management fees as the trees under management increase and TFC's revenue mix is diversified.
Theory for short selling "holders of 54m $1.28 warrants are locking in profit now and utilising resultant funds elsewhere until they need to exercise their warrants in 2018". Subsequent to discussion of this theory I read that TFC has bought back all of these warrants and refinanced them at lower rates and extended maturity to 2023. So I am wondering if the short sellers are operating as Lies and Dam Lies explained several months ago: They sell short above $1.60 and buy back below $1.40. Problem is the proportion of capital short sold as recorded on shortman.com.au does not support this explanation.
Nevertheless, I have 20% of my superfund supporting the view that TFC is undervalued, has excellent long term prospects, short sellers will have to buy back and the risks to the underlying business are well managed and not material. Shame my entry level - same as the CEO's Feb purchase - has (with the benefit of hindsight) been too high.
TFC Price at posting:
$1.64 Sentiment: Buy Disclosure: Held
