Investor Presentaiton
GBM
October 12, 2021
VALUATION
Our YE22 price target of P$18.2 for Proteak is derived from a DCF model.
Model's main assumptions:
• Teak hectares: We went through every annual report of the company to see how many hectares were planted each year. We assume it takes 20 years for a hectare planted with natural seeds
to mature and 18 years for those using clonal seeds.
• Teak prices: The first plantations to mature will be those located in Nayarit, as this state has subpar soil relative to Tabasco. Also, those fields were planted when the firm had less expertise.
We foresee the plantations in Tabasco will command higher prices as of 2027.
⚫ Teak production should halt in 2032 once all hectares have been logged. Tacotalpa's harvests expected for 2033 are considered separately. Therefore, only the MDF unit would generate
cash flows after 2032. Further upside could come from a second harvesting cycle or if the company decided to sell its teak ha. after harvesting, but we're excluding both scenarios from
our base case.
.
•
MDF: The annual production increased by 8.3% in the 2017-2019 period. Going forward, we expect it to expand at a CAGR of 1.9% as production nears a capacity of 240,000 m3. Also, we
indexed prices to a 3% annual inflation rate.
CAPEX: Modeled as a percentage of MDF board sales, given that it is the most capital-intensive unit. We project investments will remain below D&A in the medium term, although they might
increase every year between 2021 and 2026. Then, CAPEX should pick up in 2027, as cash flows from the Tabasco harvests roll in.
Taxes: PThe company has paid virtually no cash taxes in recent years due to net losses and deferred tax assets. Going forward, and as operating metrics improve, the cash tax rate may
rise
slowly to 30%.
• WACC: 10.4% and a perpetual growth rate of 3%.
DCF
TEAK
2021e
2022e
2023e
2024e
2025e
2026e
2027e
2028e
2029e
2030e
2031e
2032e
2033e
Perp
EBITDA
349
370
394
403
460
527
1,454
1,474
2,335
4,122
4,289
2,491
745
767
CAPEX
-15
-24
-34
-35
-46
-57
-79
-81
-83
-86
-89
-91
-94
-94
Leases
-26
-26
-26
-26
-26
-26
-26
-26
-26
-26
-26
-26
-26
0
Taxes
-18
-24
-33
-40
-57
-76
-277
-304
-534
-1,029
-1,144
-706
-223
-202
WK
-90
-96
-101
-106
-111
-115
-118
0
0
0
0
0
0
0
FCFF
201
200
201
196
219
254
954
1,063
1,691
2,981
3,030
1,669
402
471
TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 25View entire presentation