profit down grade , page-4

There were 6 main listed timber operators previously (TIM,GTP,GNS,WFL,ELD and FEA). I leave out TFC as it is kind of specialty but it will survive also as they are changing the model and dont have debt.

Of the 6 TIM and GTP are gone. These were the easy ones as they were just sales companies (actually they were frauds in a way). That leaves 4.

I think FEA is next to go as you point out. ELD will not be able to support it and hence have to sell it off. As for the ITC MIS operator within ELD it is difficult to know what happens to it as I am sure ELD would like to sell it. I think ELD will not survive in MIS but may sell to someone else.

That leaves GNS and WFL.

GNS should survive because it has other businesses which earn cashflow not just MIS.

WFL is now the market leader garnering $65m in MIS sales last year so obviously investors see it as a survivor for now. In a way the gain in market share protects their cash position for now. However I have concern re high proportion of MIS sales and rising debt levels. They really need to raise some cash by doing a deal to sell some of the more mature trees and free up their balance sheet. The other thing in their favour is that it is the only company with a private major shareholder who runs the company. He has much more incentive to protect the interest of shareholders. So I think WFL may survive.

It all kind of depends on what comes out of these government inquiries and whether the government tightens regulation and tax laws. This would be a bad move as the regulations are already very tight and would push more companies under. In this environment probably only GNS survives because it is not all MIS, but is wounded.