phaunos timber fund investor presentation 25 april 2017 · 2017. 4. 25. · wood-based panels...
TRANSCRIPT
Phaunos Timber Fund
Investor Presentation – 25 April 2017
Stafford representatives
2
Stephen Addicott
Partner, Stafford TimberlandStephen is a professional forester with 25 years experience in plantation management, timberland appraisals, due diligence and investment modelling.
Marek Guizot
Investment Manager, Stafford TimberlandMarek is a professional forester with over 20 years experience of forestry, primarily in Africa and Latin America.
3
Phaunos 2016 Investor Presentation
1. Phaunos Overview
2. Phaunos Turnaround
3. Dividend Proposal
4. Market Update
5. Stafford’s Capability & 2017
Continuation Vote
Contents
7 underlying
investments on
3 continents
2
Phaunos Timber Fund overview
4
Phaunos investment
A listed global
timberland
company
1
Interests in
150,000 ha of
sustainable
plantations
3
¹ As at 31 December 2016
US$ 301.3m¹
NAV of
timberland
assets
4
Matariki Forests
Country : New Zealand
Planted area : 115,000 ha
Main species : Radiata pine
Rotation length : 24-26 years
Main markets : Domestic sawmills and sawlog exports
Phaunos ownership : 23%
Phaunos investment portfolio
5
NAV
46%
Mata Mineira
Country : Brazil
Planted area : 9,500 ha
Main species : Eucalyptus
Rotation length : 8 years
Main markets : Charcoal and paper & packaging
Phaunos ownership : 100%
NAV
11%
Eucateca
Country : Brazil
Planted area : 7,300 ha
Main species : Eucalyptus
Rotation length : 8 years
Main markets : Biomass (agricultural drying)
Phaunos ownership : 100%
Phaunos investment portfolio
6
NAV
6
10%
Aurora Forestal
Country : Uruguay
Planted area : 11,000 ha
Main species : Pine
Rotation length : 23 years
Main markets : Own integrated sawmill
Phaunos ownership : 24%
NAV
9%
Pradera Roja
Country : Uruguay
Planted area : 3,300 ha
Main species : Eucalyptus
Rotation length : 23 years
Main markets : Domestic sawmills or sawlog exports
Phaunos ownership : 100%
Phaunos investment portfolio
7
NAV
7%
GTFF
Country : USA
Planted area : 4,600 ha
Main species : Poplar
Rotation length : 12 years
Main markets : Domestic sawmills and sawlog exports
Phaunos ownership : 17%
NAV
5%
Phaunos Turnaround
Improving results following Phaunos turnaround
9
YE 2015 YE 2016 Comments
Revenues US$ 16.3m US$ 9.5mMinimise volatility by debt
reduction and market access
Operating expenses(excl. non-cash costs)
(US$ 8.4) (US$ 7.3m)Reduced from (US$ 22m) in
2013.
Asset sales US$ 9.3m US$ 27.6mHigher risk assets reduced
from 36% in mid-2014 to 13%.
Share buybacks &
dividends(US$ 0.3m) (US$ 9.1m)
Has supported share price
increases.
Cash held US$ 25.6m US$ 45.6mUS$15m reserve and surplus
for investments/capital return
Net Asset Value (NAV) US$ 278.8m US$ 301.3mSteady improvement from a
realistic base
Share Price US$ 0.35 US$ 0.41Consistent narrowing of
discount
NAV/Share US$ 0.49 US$ 0.55 Assisted by share buybacks
Net Profit/(Loss) (US$ 10.5m) US$ 18.3mA reflection of the turnaround
completed to date
Key Metric
Phaunos performance in 2016
10
• The NAV for Phaunos increased by 8% to USD 301.3m.
• Matariki’s NAV increased by 11%, largely due to good log prices.
• NAV growth for the Brazilian assets (Mata Mineira & Eucateca) was relatively flat in local currency, but BRL appreciation resulted in a combined increase of 25% in USD-terms.
• Uruguayan assets (Aurora Forestal & PraderaRoja) were largely flat1.
• Non-core assets2 reduced in line with ongoing asset sales.
NAV NAV for underlying investments
1 Reduction in Pradera Roja is due to the repatriation of cash from 2015 standing timber sales2 GTFF, NTP and Green China
0
30
60
90
120
150
Asse
t N
av (
US
D m
)
2015 2016
0
60
120
180
240
300
Po
rtfo
lio N
AV
(U
SD
m)
Phaunos performance in 2016
11
• Total income came to USD 9.5m.
• This decreased from US$ 16.3m in 2015 since the large standing timber sale made in Brazil was not repeated in 2016.
Operating profit (excl. asset sales & non cash items) Income & costs
8.6 8.8
16.3
9.5
-22.0
-11.7-8.4 -7.3
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2013 2014 2015 2016
US
D m
illio
n
Income Cash costs
Phaunos performance in 2016
12
• Phaunos’ objective has been and remains the sale of assets that are:
• High risk (our target level is less than 10%).
• Non-yielding
• High cost
• Total income from asset sales and return of capital amounted to USD 27.6m.
• Phaunos has reduced its share of high risk assets from 36% in mid-2014 to 13% at the end of 2016.
Asset sales Asset sales and return of capital
0
5
10
15
20
25
30
2014 2015 2016 2017-18*
US
D m
illio
n
Green China Eucateca (partial) Pradera Roja (partial)GTFF Green Resources Eucateca (Alto Jauru)Sale contracted Sale under negotiation
36%
28%
36%
Jun-14
Lower risk
Medium risk
Higher risk 66%
20%
13%
Dec-16* Forecast
Phaunos performance in 2016
13
• Phaunos’ cash position increased significantly to USD 45.6m during 2016.
• The increase is due primarily to return of capital and asset sales.
• This provides a buffer for operational costs in the event revenues dip unexpectedly, as well as the possibility to:
• Continue our programme of share buybacks
• Support dividend payments
• Take advantage of Stafford’s existing pipeline of investment opportunities in the secondary market
Cash position Cash held at year-end
0
10
20
30
40
50
2013 2014 2015 2016
US
D m
illio
n
* Note : After share buybacks and dividends totalling US$ 9.1m
*
0.30
0.32
0.34
0.36
0.38
0.40
0.42
0.44
0.46
Jan
Feb
Ma
r
Apr
Ma
y
Jun
Jul
Aug
Sep
Oct
No
v
De
c
Jan
Feb
Ma
r
Apr
2016 2017
US
D/s
hare
Phaunos performance in 2016
14
• The share price increased by 17% from USD 0.35 to USD 0.41 over the course of the year.
• The share price has increased a further 7% to USD 0.44 in Q1 2017.
• In 2016 a total of 19.1 million shares were bought back at an average price of USD 0.39 (total spend USD 7.5m).
• The NAV per share has increased to USD 0.55, and the share price discount has narrowed from 29% in 2015 to 25% at end 2016.
• At the end of Q1 the share price discount was 20%.
Share price & buybacksPhaunos share price
+17%
Phaunos share price vs. NAV
0
10
20
30
40
50
60
70
80
90
2013 2014 2015 2016 1Q2017
US
D c
ents
per
share
NAV per share Share Price
Dividend Proposal
Phaunos dividends
16
• Phaunos paid a US 0.3 cent/share interim dividend in 2016.
• The Board has proposed that a final dividend of US 1.6 cent/share, totaling USD 8.9m, be paid following the AGM in June.
• The total dividend of US 1.9 cent/share for 2016 is equivalent to 3.5% of NAV.
• Phaunos expects to pay regular dividends going forward and is targeting a sustainable annual distribution of at least US 1.9 cents/share1.
• Dividends will be paid twice a year.
• The total distribution expected for 2017 is therefore US 2.55 cents/share, or 5.8% yield on the Q1 2017 share price of USD 0.44.
Commencement of regular dividends Dividend payments outlook
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2016 2017 2018
US
ce
nts
pe
r sh
are
2016 dividend
2017 dividend (forecast)
2018 dividend (forecast)
1 The ability to match or exceed this target will depend on a number of variables and should not be interpreted as a profit forecast.
Sustainable dividends from increasing wood flow
17
• Sustainable revenue outlook is supported by increasing wood flows.
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
2012-2016 ¹
2017 2018 2019 2020 2021 2022 2023 2024 2025
Volu
me (
mill
ion m
3)
Wood flows increasing
Estimate
Annual harvest
Trend line (2016-25)
Post-Continuation Vote
• Looking ahead, Stafford estimates the current portfolio can provide sustainable net cash flow of US$ 5m to 11m in addition to capital appreciation
• Cashflow can be improved by re-investment of cash together with further diversification
-30
-25
-20
-15
-10
-5
0
5
10
2011 2012 2013 2014 2015 2016f
Net cash flo
w (
US
$ m
illio
n)
Cash flow positive
2017-22
EstimateHigh
Low
Market update
New Zealand
China
S.Korea
India
USBrazil
Uruguay
Other
Phaunos market exposure
19
Revenue exposure by geography 1
1 Based on Phaunos 2017 budget
Revenue exposure by product/sector 1
Finished sawtimber
Electricity generation
Sawmills
Pulp & paper
Wood-based panels
Charcoal/pig-iron
Carbon
Despite its large weighting towards New Zealand assets, Phaunos has a well-diversified market exposure, with
scope to improve this further by increasing wood sales from its Brazilian assets as market conditions improve.
Wood Markets – New Zealand
20
Export demand is driven by China.
New Zealand is the world’s largest exporter of softwood logs. Its forests are typically not more than 150 km from a port.
Buoyant housing construction sector is maintaining high local sawlogdemand.
Average increase in export sawlogprice.
0
5
10
15
20
25
30
35
Dec-0
5
Se
p-0
6
Jun
-07
Ma
r-08
Dec-0
8
Se
p-0
9
Jun
-10
Ma
r-11
Dec-1
1
Se
p-1
2
Jun
-13
Ma
r-14
Dec-1
4
Se
p-1
5
Jun
-16
Consents
appro
ved (
annualis
ed)
Th
ousands
Single Multi
0
20
40
60
80
100
120
2013 2014 2015 2016N
ZD
Domestic (NZD/ton) Export (NZD/JAS m3)
China
South Korea
India
Japan
Other
Wood Markets – China & United States
21
From 2017 China has banned all harvesting of
its natural forest – which accounted for almost
30% of its timber (both soft- & hardwood).
China has a huge wood deficit and its
growing demand has been met by
imports, particularly from New Zealand.
Housing starts in the US are steadily
increasing following the 2009-11 crisis.
Average sawtimber prices have trended
upwards over the past 18 months.
0
500
1,000
1,500
2,000
2,500
Jun
-71
Dec-7
4
Jun
-78
Dec-8
1
Jun
-85
Dec-8
8
Jun
-92
Dec-9
5
Jun
-99
Dec-0
2
Jun
-06
Dec-0
9
Jun
-13
Dec-1
6
US
housin
g s
tart
s (
000's
pa)
Imports (logs &
sawtimber)
Domestic -plantations
Domestic -natural forest
200
250
300
350
400
450
Jan
Ma
r
Ma
y
Jul
Se
p
Nov
Jan
Ma
r
Ma
y
Jul
Se
p
Nov
Jan
Ma
r
2015 2016 2017
US
D/1
,000 b
oard
feet
30 million
m3
0
5
10
15
20
25
30
35
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016Soft
wood im
port
s (
Mill
ion m
3)
New Zealand Russia North America Australia Other
Stafford Timberland & Continuation Vote
0.0
0.5
1.0
1.5
2.0
2.5
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16
Fu
nds U
nder
Managem
ent (U
S$ b
n)
Stafford Timberland
23
¹ In US$ as at March 2017, contributing towards US$ 4.8bn under management of Stafford Capital Partners² Since inception to 31 December 2016. Across 58 secondary and co-investment transactions
10.1%Secondary & Co-Investment IRR ²
500m
Invested over the past 18 months
$
Stafford Timberland
Phaunos
Funds Under Management
2.3bnTimberland funds under management1
• Team of experienced forestry professionals.
• 12 year track record.
• Extensive network
• Access to unique proprietary deals, often in the secondary market.
An Investment Manager with specialist skills and proven track record
2017 continuation vote
24
Stafford has completed the first phase of the Phaunos turnaround strategy announced in mid-2014.1
In 2016 the Phaunos NAV/share increased 12%, and the share price increased 17%.2
Phaunos provides low-cost and liquid exposure to the timberland asset class.4
Stafford has the deal flow, knowledge, and ability to expand the Company.5
At the AGM on 19 June 2017, Phaunos will be seeking a 5-year continuation of the Company.
The case for continuation is that …
Positive operating cash flows, together with asset sales, have increased cash reserves to a level which will allow for ongoing share buybacks, sustainable dividends, and potential new investments.
3
Phaunos is now in a position to deliver on its vision of being a …
Globally diversified, listed timberland fund, with potential to provide yields of 3-5% p.a. and NAV growth of 3-5% p.a., managed in accordance with ESG best practice.
Disclaimer
25
• Stafford Capital Partners Limited ("Stafford") is distributing this strategy presentation in its capacity as manager of Phaunos Timber Fund Limited (the "Company") The Company is a
Guernsey domiciled Authorised Closed-ended investment scheme pursuant to section 8 of the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended and rule 6.02 of the
Authorised Closed-ended Investment Schemes Rules 2008 published by the Guernsey Financial Services Commission. The Ordinary Shares of the Company are admitted to the Official List
of the UK Listing Authority and to trading on the London Stock Exchange’s main market.
• In distributing this presentation Stafford is relying on the fact that all recipients are qualified investors' within the meaning of section 86(7) of Financial Services and Markets Act 2000
(“FSMA”) who are also (i) investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (''FPO"); or (ii) high
net worth companies within the meaning of Article 49 of the FPO; or.(iii) members of the Company within the meaning of Article 43(2) of the FPO; or (iv) certified high net worth individuals
within the meaning of Article 48 of the FPO; or (v) certain sophisticated investors within the meaning of Article 50(1) of the FPO (each a "relevant person"). Persons who do not fall within any
of these definitions should not rely on this document nor take any action upon it. The document is only exempt if it is distributed to these exempt categories of recipients. This document has
not been approved as a financial promotion or otherwise by a person who is authorised under FSMA for the purposes of section 21 of FSMA and rules made under such legislation or any
other applicable securities laws of any other territory. Approval will be required unless the recipient of this promotion is a relevant person. This presentation has not been, and will not be,
reviewed or approved by the Financial Conduct Authority ("FCA") or any other authority or regulatory body.
• Stafford is issuing this strategy presentation exclusively as manager of the Company and will not be responsible to anyone other than the Company for providing regulatory and legal
protections afforded to customers (as defined in the rules of the FCA) nor for providing advice in relation to the contents of this document on any matter, transaction or arrangement referred
to in it. None of Stafford nor the Company, nor any of their respective directors, officers or employees makes any representation or warranty, express or implied, as to the accuracy or
completeness of the information or reasonableness of any opinions contained in this strategy presentation .
• Stafford is authorised and regulated by the FCA, but has not authorised the contents of, or any part of, this document for the purposes of Section 21 of FMSA. To the fullest extent permitted
by law, none of Stafford nor the Company (nor their respective members, directors, officers, employees, agents or representatives) nor any other person accepts any liability whatsoever for
any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this
document or its contents or otherwise in connection with the subject matter of this document. The contents of this strategy presentation are not to be construed as legal, financial or tax
advice. This document should not be distributed in whole or in part to other parties.
• This strategy presentation is being supplied to shareholders and other relevant persons and solely for their information and does not constitute or contain any invitation or offer to any person
to subscribe for, otherwise acquire, or dispose of any Ordinary Shares in the Company or advise persons to do so in any jurisdiction. This strategy presentation does not constitute a
recommendation regarding the Ordinary Shares of the Company.
• Some statements contained in this presentation are or may be forward-looking statements, including without limitation any forecasts or projections. Actual results may differ from those
expressed in such statements, depending on a variety of factors. Any forward-looking information contained in this strategy presentation has been prepared on the basis of a number of
assumptions, only some of which are set out in the presentation , which may prove to be incorrect, and accordingly, actual results may vary.
• For the avoidance of doubt, nothing in this strategy presentation is intended to constitute a profit forecast.
• The value of any investment may fall over time and you may receive back less than you invested.
• Stafford Capital Partners Limited is incorporated in England under registered number 04752750 and its registered office is at 4th Floor, 24 Old Bond Street, London, W1S 4AW, England.