Monday, January 29, 2007

Money grows on trees

Money grows on trees
Patcharapol Suviyanong, the general manager of Touchwood Forestry, shows off some of the assets at its 700-rai site in Kabin Buri district of Prachin Buri.
Forget the metaphors about cultivating and harvesting returns. Touchwood Forestry offers investors a chance to watch real trees grow and pay off at maturitySOMPORN THAPANACHAI
With local interest rates poised to head downward, and stocks and bonds in the doldrums, individual investors are looking at alternatives, but it's certain that very few have ever considered trees.
A portfolio made up of wood may seem exotic or even risky, but Touchwood Forestry Co believes it has found a niche. It specialises in agarwood, one of the most expensive woods in the world, which is used to produce essential oils and scented hardwood.
The local unit of Hong Kong-based Touchwood Ltd is offering investments in its reforestation projects.
It is a medium-term investment requiring an initial sum to purchase the trees and an annual maintenance fee for five years. In the sixth year, investors have the option to sell the trees back to the company or other buyers.
Six investment packages available, starting from 64,500 baht for 23 agarwood trees on a 25-square-wah plot, to the largest one of 2.176 million baht for 920 trees on a 2.5-rai plot.
Touchwood promises to repurchase the trees after six years. As with any commodity, market prices can vary but current contracts are being based on a buyback price of 10,000 baht per tree, which would represent an annual return to investors of 18-22%.
Investors will receive a harvest certificate indicating the plantation plot and number of trees they hold, as well as expected yield in terms of essential oils and scented agarwood. The certificate is transferable. Investors are also required to sign a land-leasing agreement.

Investors who opt out before six years can sell their holdings back to the company after two years. They will receive the cost of the tree plus two years of maintenance fees.
Touchwood will guarantee damages at a minimum of 6,000 baht per tree if it cannot find replacements for the investors, according to Patcharapol Suviyanong, the company's general manager.
Agarwood is a high-value tree, but only 7% of naturally grown trees produce the precious dark hardwood, and take more than 10 years to generate sufficient resin. Therefore, Touchwood has applied a patented technique, owned by the University of Minnesota in the US, which stimulates the trees to produce agarwood.
Touchwood aims to used the technique, created under a joint research project, to speed up agarwood generation and cut the production process of oil extraction and scented wood to six years.
Touchwood Forestry was granted Board of Investment privileges to grow agarwood and sandalwood in Thailand for export. Incentives include an eight-year corporate tax holiday for a 1,900-rai agarwood plantation.
Mr Patcharapol said the company had planted around 700 rai of Aquilaria Crassna agarwood so far in three sites in Kabin Buri district of Prachin Buri. About 50% of the trees are the company's assets _ grown for commercial cutting and to replace damaged trees on leased plots. It is now developing a fourth plantation. It has the capacity to grow about 200,000 trees a year. It produces the seedlings from seeds collected mainly in Khao Yai.
He said Touchwood would establish its own oil-extraction factory in the next two years to produce oil for export to the Middle East, Europe and China.
Touchwood Group has more than 15,000 acres of plantations for sandalwood, mahogany and vanilla in Thailand and Sri Lanka. It has also started producing gum trees in Australia.
Although the investment package provides attractive returns, potential investors are advised to give it careful consideration as it is new to Thailand.

Investors can harvest big returns from wood

Touchwood Forestry Co Ltd, which claims to be Asia's most successful operator of private forests, aims to list its Thai operations on the Stock Exchange of Thailand (SET) in the fourth quarter.
Steve Griffin, the group accountant of Touchwood Group, said its reforestation business had offered individual investors the chance to be part of a lucrative investment since 2004. The company has 400 clients investing in its first three agarwood plantations in Prachin Buri province.
Around 60% of its clients are Thais while the rest are investors from Sri Lanka and the Middle East who have done business with Touchwood for years.
Nevertheless, the name of Touchwood Forestry was unfamiliar to many Thai people so it was difficult for them to invest a significant amount of money in the company, said Mr Griffin.
''Therefore, to become a SET-listed company and to be strictly monitored by the Securities and Exchange Commission could help us convince local investors about our credibility and improve our sales opportunities as well,'' he said.
Touchwood Forestry is a part of the Hong-Kong-based Touchwood Group. Touchwood Investment Co is another unit that manages reforestation of mahogany and vanilla trees in Sri Lanka and is listed on the Colombo Stock Exchange.
Touchwood Forestry holds Board of Investment privileges to plant agarwood and sandalwood in Thailand for export. The BoI incentives offer an eight-year corporate tax holiday for the 1,900-rai agarwood plantation.
According to chief executive Pierre Maloney, the company plans to purchase 10 land plots in Prachin Buri totalling 1,900 rai. The land would be owned by Touchwood Forestry, of which 51% of the shares belong to Thai shareholders.
Currently, the company has around 1,000 rai in hand for its first four agarwood plantations.
Each investor is allocated plots ranging from 25 square metres to 2.5 rai to grow agarwood trees, which take six years to mature. Touchwood will then cut them and sell them in overseas markets, returning revenue from sales to the investors.
Returns on the investment in Thailand would be 18-22%, the company said.