Investor Presentaiton
October 12, 2021
KEY TAKEAWAYS FROM OUR DOCUMENT
The company has two business units, Teak and MDF panels:
Teak unit (P$11.2 per share): Future cash cow that is currently overlooked by the market.
• Teak yields high-quality wood that is used for housing construction, yacht decks, and high-end furniture.
⚫ Teak trees take 18-20 years to mature.
• World's annual production: ca. 2.5 million m³.
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Global supply chain: Teak is exported to Asia where it's transformed to its end products. India is the largest consumer (1.3
million m3), but most of the demand is for domestic consumption. Vietnam and China are focused on selling their products
(including furniture) to developed nations.
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Developed nations import ca. US$37 billion of wood furniture annually (60% from Asia).
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Regulation and concerns about procuring ethically sourced materials have made third-party certifications increasingly
necessary.
Proteak is in the process of verifying all its plantations by FSC (1,716 already verified, 4,488 by year's end).
• Proteak's owns 8,400 hectares (86% wholly-owned; 14 through a JV). Starting 2022, its plantations should reach
harvesting ages. Moreover, its premium plantations should reap by 2027.
MDF Wood Boards unit (P$6.1): More rational competition will set the tone for market pricing.
MDF wood boards are used in the manufacturing of furniture, cabinets, flooring, and interior design projects.
• Mexico's consumption: 852,000 m³ in 2019 (+5.3% 2016-2019 CAGR).
• Proteak's Tecnotabla brand achieved a market share of 25% in only four years.
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More rational competition: Market prices have remained low since the unit's inception, on the back of heavily discounted
imports coming from Brazil, mainly. The Brazilian construction index points to a recovery in the local market, which should
contribute to price stabilization in Mexico.
Valuation and Margin of Safety
• Our DCF approach yields a PT P$18.2 per share (264% upside).
Strip down: If we only valued the MDF unit and future carbon credit issuances, we'd arrive at a P$5.91 valuation (+18%).
Investors are acquiring the teak unit for free.
⚫ JV offer valued the teak unit at P$7.1 per share (42% upside) if we assigned nil value to MDF. Proposal entailed contributing
1,800 ha. at a US$50 million valuation, but its rejection points to confidence of further upside.
GBM
TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 2View entire presentation