I read the Glaucus report too. There are some significant issues highlighted in the report: the lack of independence of estimates of yields, survival rates etc; the lack of conguence between estimates and actual results achieved; and the dodgy nature of one of the potential customers; the revolving door in the board room.
There were also some omissions from the Glaucus report. For example there was an accusation of QIN artificially supporting the price by buying up the MIS component of the harvest and thus failing to have a market determined price for the product. But I would have thought that if it's possible to achieve a near monopoly on your product and by so doing to support the price, that is a good thing to do. It seems that so far QIS has managed to achieve a price of US$45oo/kg for the product they have sold. That seems to be a good thing to me.
Glaucus also quotes figures on all sandalwood oil being imported into India and claims that because this price is lower that QIS must not be achieving the price they claim. However we don't know how much Australian Sandalwood or other Sandalwood oils are imported into India at much lower prices.
Glaucus also doesn't mention the presence of Santalis. (remarkable in a 39 page report) Figures quoted in broker research from UBS and Cannacord Genuity suggest that a trade sale of Santalis could net US$300-500M. That would just about cover the current SP. Could it be that Glaucus has built up a very large short position on QIS and has realised that a sale of Santalis is in the offing and they are trying to cover their shorts? Who knows?
I'm confused.
Cheers,
Tim.
TFC Price at posting:
$1.31 Sentiment: None Disclosure: Held
