QIN - Quintis Limited

[skc]

The plot thickens...

QIN issued a response that wasn't half bad, although it did falg some new issues with its Chinese customers. Then this morning, MD and major shareholder resigned to possibly launch a bid with a 3rd party.

That kind of smells and it's not the scent of sandlewood that I am smelling...

 

[craft]

The plot thickens...

QIN issued a response that wasn't half bad, although it did falg some new issues with its Chinese customers. Then this morning, MD and major shareholder resigned to possibly launch a bid with a 3rd party.

That kind of smells and it's not the scent of sandlewood that I am smelling...

"The US-based global investment management firm referred in the Company’s Beyond Carbon announcement of 28 June 2016 is GMO LLC."

"At no time has Glaucus contacted Quintis; nor has Glaucus visited Quintis’s plantations.

Quintis notes that:
i. Quintis abides by Australian laws, including the compliance and governance requirements of the Corporations Act, and prepares financial statements that comply with Australian Accounting Standards. Quintis's adherence to these rules is audited by EY and monitored by ASIC and ASX.

By its own admission, the Glaucus opinion piece “is a short-biased opinion piece” and is not required to adhere to any of these rules. ii. Just because an activist US-based short seller makes various claims, claims which it stands to benefit financially from, does not mean those claims are true."

Who do you think may have done the best due diligence here? Jeremy Grantham's 77 Billion FUM investment business which invested directly into Indian sandalwood plantations or Glaucus (FUM???). Obviously some big money now thinks that QIN as the management company is cheap enough to make a move on from their understanding of the situation and Frank Wilson seems happy to help - don't think he's ever really been happy with it as a listed company.

With this being in a trading halt prior to the real fight back, I suspect Glaucus will be crapping their shorts. Gap Risk!!! Fun to watch.

Of course Glaucus will probably spin Wilson leaving as rat from a sinking ship to save their shorts but it will be to no avail if an indicative offer from a credible buyer materialises before the trading halt lifts.

Two stories one will be profitable.

 

[skc]

Who do you think may have done the best due diligence here? Jeremy Grantham's 77 Billion FUM investment business which invested directly into Indian sandalwood plantations or Glaucus (FUM???).

I don't know. Who's done more due diligence on Valeant? Bill Ackmen or John Hempton?

Obviously some big money now thinks that QIN as the management company is cheap enough to make a move on from their understanding of the situation and Frank Wilson seems happy to help - don't think he's ever really been happy with it as a listed company.

With this being in a trading halt prior to the real fight back, I suspect Glaucus will be crapping their shorts. Gap Risk!!! Fun to watch.

QIN resumes at ~$1.20-$1.25 which is still down from ~$1.40 before the report was published. So market is not too convinced that a takeover offer was obvious yet.

If I was a lazy short (e.g. just going along for a ride after superficial research) I would certainly cover on the back of this... one should still be in profit and it's probably not worth the risk of a takeover being potentially real. But if I am doing strategic shorts after thorough research, then I'd probably hold. I don't know which camp Glaucus is in (probably the former).

QIN being a fraud and someone taking it over are not mutually exclusive events (Quindell's shareholders are still can't believe their luck 2 years after SGH showed up with a billion dollar), however.

Personally I hope the takeover doesn't happen, just so that we get to read the last chapter of the story...It's not quite JK-Rowling-getting-hit-by-a-bus-before-releasing-the-last-Harry-Porter-book disappointing, but being taken private may mean the ending won't be revealed...

Disclosure - I have no position.

 

[craft]

I don't know. Who's done more due diligence on Valeant? Bill Ackmen or John Hempton?



QIN resumes at ~$1.20-$1.25 which is still down from ~$1.40 before the report was published. So market is not too convinced that a takeover offer was obvious yet.

If I was a lazy short (e.g. just going along for a ride after superficial research) I would certainly cover on the back of this... one should still be in profit and it's probably not worth the risk of a takeover being potentially real. But if I am doing strategic shorts after thorough research, then I'd probably hold. I don't know which camp Glaucus is in (probably the former).

QIN being a fraud and someone taking it over are not mutually exclusive events (Quindell's shareholders are still can't believe their luck 2 years after SGH showed up with a billion dollar), however.

Personally I hope the takeover doesn't happen, just so that we get to read the last chapter of the story...It's not quite JK-Rowling-getting-hit-by-a-bus-before-releasing-the-last-Harry-Porter-book disappointing, but being taken private may mean the ending won't be revealed...

Disclosure - I have no position.

I picked some TFS up once for a bit of a feel but put it back down because I couldn’t get my head around the impact of their volume on future price and whether or not they would have enough market share / demand to set price.

(The time frame for more clarity on these issues has not passed so I have never looked again until your post alerted me to the goings on.)

Normal agriculture risk is also obviously at play on yield and survival.

However I never got the feeling of it being a fraudulent business. High risk/reward with quite a time frame before becoming financially self-funding which made it high risk in regards to ongoing risk of access to funding when I looked at it.

Like I say one of the two stories will be profitable – speculating on stories is not my game though, but if it was I would be going long here – I suspect Wilson has a real desire to see the company go private and forget about speculators. Being listed on the ASX does not really contribute to how it accesses funding, growers or customers so why bother?. I don't believe it to be a fraud - definitely contains business risks that could fail but not a fraud. It would be sad to not see the end of the story though.

ps

No idea about Valeant – I thought that was an old car.

 

[skc]

Like I say one of the two stories will be profitable – speculating on stories is not my game though, but if it was I would be going long here – I suspect Wilson has a real desire to see the company go private and I don't believe it to be a fraud - definitely contains business risks that could fail but not a fraud. It would be sad to not see the end of the story though.

Agree there isn't solid evidence of fraud... but a tree growing business with an opaque end market, one can't craft a better vessel for a fraud if one tried.

My guess is that the rewards/risks are better for buying this stock later... but a takeover would certainly devoid that opportunity.

No idea about Valeant – I thought that was an old car.

Plenty of other articles thru the years but this is the final chapter. Warning "contain spoilers".

Spoiler

http://www.afr.com/markets/aussie-john-hempton-beat-wall-street-royalty-on-valeant-20170314-guy6g8

 

[Miner]

Just my thought on saQndalwood.
How many of us have used sandalwood in recent year ?
How many of us have actually smelled the Australian sandalwood grown in Australia, Indian sandalwood grown in Australia and Indian sandalwood as grows in India.
If you have smelt and know the market of sandalwood, then ask who are the users of sandalwood as wood and as oil/essence ?
Affordability of having real sandalwood oil vs simple chemically improvised oil smells like sandalwood.
After these, please look into the claims made by Q Sandal company and see the future.
I have tested all of them and regular user of sandalwood as wood at home. I know the difference and will think few times on my options before putting money on Q Sandal.

 

[skc]

Just my thought on saQndalwood.
How many of us have used sandalwood in recent year ?
How many of us have actually smelled the Australian sandalwood grown in Australia, Indian sandalwood grown in Australia and Indian sandalwood as grows in India.
If you have smelt and know the market of sandalwood, then ask who are the users of sandalwood as wood and as oil/essence ?
Affordability of having real sandalwood oil vs simple chemically improvised oil smells like sandalwood.
After these, please look into the claims made by Q Sandal company and see the future.
I have tested all of them and regular user of sandalwood as wood at home. I know the difference and will think few times on my options before putting money on Q Sandal.

Can you elaborate? Are you saying QIN's version of the sandalwood market is truthful or unbelievable?

Personally I can't really agree why a bottle of Grange should sell for 200x that of a bottle of whatever $10 wine, or why a LV bag is priced at 100x another totally functional bag. The answer isn't something you can logically deduct/imply from your own personal experience/opinion. Now I can easily see that there are indeed demands for Grange and LV bags at those price points... and the truth for the market of US$4500/kg oil is out there, I just don't know the answer myself.

 

[So_Cynical]

Lots of trees are due to be harvested and sold in the next few periods. No doubt any remaining investors will be hoping QIN can "Show me the MONEY!!!!".

Last year they bought out many of the early wood lot investors, it seemed a little strange at the time, spending money on paying out investors.

and the truth for the market of US$4500/kg oil is out there, I just don't know the answer myself.

The potential for niche/high end forestry is phenomenal, next to no one is growing high value timber on a commercial scale, natural wild timber of many high end species is pretty much impossible to obtain legally, totally impossible in quantity.

 

[skc]

Last year they bought out many of the early wood lot investors, it seemed a little strange at the time, spending money on paying out investors.

Yes that's what the short seller's report has been pointing at being the telltale sign of a ponzi scheme. On the other hand, there are possible legitimate reasons for QIN buying it's own wood at a higher price. They are vertically integrated with a location advantage (lower transport and handling costs) so if they have an end market demand for the oil, they are best positioned to capture the margins from that part of the value chain.

On very rough calculations, they paid ~$100/kg of wood(2014), and they stated that oil yield is ~3.7%. So each kg of wood yields 0.037kg of oil, worth ~$166 (using $4,500/kg for oil). So on paper it stacks up to sell the oil rather than to sell the wood.

 

[So_Cynical]

On very rough calculations, they paid ~$100/kg of wood(2014), and they stated that oil yield is ~3.7%. So each kg of wood yields 0.037kg of oil, worth ~$166 (using $4,500/kg for oil). So on paper it stacks up to sell the oil rather than to sell the wood.

I will have to do some reading, anyway looking at the whole tree the heart wood would make up about 30-40% of the whole harvest tree dry weight, i imagine they would sell that as timber and just chip, crush
and then use solvent extraction on the remainder, from memory the heart wood has the highest oil content.

Whats not in doubt is the fact that mature Sandalwood trees are very valuable, plantation trees perhaps even more as there are no issues around ethics and sustainability...might take a little punt on this one, a half a position.

 

[Miner]

Can you elaborate? Are you saying QIN's version of the sandalwood market is truthful or unbelievable?

Personally I can't really agree why a bottle of Grange should sell for 200x that of a bottle of whatever $10 wine, or why a LV bag is priced at 100x another totally functional bag. The answer isn't something you can logically deduct/imply from your own personal experience/opinion. Now I can easily see that there are indeed demands for Grange and LV bags at those price points... and the truth for the market of US$4500/kg oil is out there, I just don't know the answer myself.

Hi SKC
I was not subscribed to this thread so did not have a chance to read your query earlier. Sorry as you were not neglected.
OK coming back your question:
I did not say or mean that QIN version of sandalwood was unbelievable or untruthful.
Sandalwood, as grown in India, has a different climate than QIN is growing here. They could be same product but fragrance has a lot to do with the climatic condition.
For example, I have found plenty of Cinamon in Madagascar while working there. They were cheap and good quality. But the smell and taste of the same Cinamon you get in India are much different and taste better.
It does not mean they were fake.
As you referred to Grange bottle. That is why grapes grown in some climate are better than other climate and hence the wine quality.

 

[So_Cynical]

Hi SKC
I did not say or mean that QIN version of sandalwood was unbelievable or untruthful.
Sandalwood, as grown in India, has a different climate than QIN is growing here. They could be same product but fragrance has a lot to do with the climatic condition.

QIN grows Sandalwood in the Kimberly region of far north WA, dry winter with monsoonal wet summer, very similar to northern India i would think.

Ok so doing some reading - (Indian Sandalwood - Santalum Album) is native to southern India, grows often at altitude and although monsoonal grows in very high rainfall areas, so similar if one considers that altitude is not that important.

Anyway the QIN trees are cloned i think so genetically identical, according to wiki QIN will be the largest supplier in the world by 2018.

https://en.wikipedia.org/wiki/Sandalwood

 

[galumay]

...so similar if one considers that altitude is not that important.

I have no knowledge of WA sandalwood compared to Indian, but the assupmtion altitude is not that important could be misleading. ALtitude means temps will be a lot lower and if you consider a crop like coffee, altitude has a very significant effect on flavour profile. Another possible important difference would be soil type - as we know from wine, that too can be critical to flavour profile.

I realise both of those comparisons are considering taste, but its also possible aromatics are effected too.

 

[skc]

I have no knowledge of WA sandalwood compared to Indian, but the assupmtion altitude is not that important could be misleading. ALtitude means temps will be a lot lower and if you consider a crop like coffee, altitude has a very significant effect on flavour profile. Another possible important difference would be soil type - as we know from wine, that too can be critical to flavour profile.

I realise both of those comparisons are considering taste, but its also possible aromatics are effected too.

None of these really matters... the 2 key questions are simply:
- Are there nearly as much biological assets as QIN claims?
- Are the prices achievable and at what volume?

Numbers a bit hard to come by but I think they have sold at most ~$5m of the top shelf album oil. That's no more than 1500kg. That's ~ 40 tonnes of sandlewood heartwood worth of oil. What's the market like when you try to sell 20-50x that amount?

 

[galumay]

None of these really matters.

Ok, if you say so! It was you that raised the question of altitude!!

I suspect that the questions are all entertwined, whether or not the locally grown trees produce an oil of the same quality will be a part of the equation in considering what the potential market is for locally produced oil.

Without looking any deeper I agree that there is a fair bit of 'potential' in their numbers and increasing sales by 20-50x is a big ask - even if the oli is of the same quality.

 

[InsvestoBoy]

Santalum spicatum, is the Australian native sandalwood that grows and evolved natively in WA as a symbiote to Acacia acuminata (Jam Wattle) and a couple of other genus and species.

Lots of mining companies plant Acacia acuminata to meet their land rehabilitation requirements, with plans to use it as host for native sandalwood plants in the future. It is a lucrative crop.

Australian native sandalwood, despite the difference in climate and growing conditions for Indian sandalwood, still produces a high quality, high yield product, some of the best in the world. The quality of the end product is also very high compared to a lot of junk that leaves India and other developing countries trying to cash in on global markets. The phytochemical profile is different, but not hugely so.

No interest in QIN or any other plantation stocks, I know this basically only because I'm interested in some Australian native plants as a hobby and grew Acacia acuminata trees in the past.

 

[skc]

Ok, if you say so! It was you that raised the question of altitude!!

No. I never did. I think miner mentioned it first and So_C took responded.

 

[galumay]

No. I never did.

Well I thought it was you, and thats all that matters!!
(early onset alzheimers is worse on Fridays I find.)

 

[skc]

Ooops... we lost our only credible customer and forgot to tell the market for 5 months. Nice one QIN. Way to earn credibility.

Improved communications will solve all the problems.

 

[Boggo]

Ooops... we lost our only credible customer and forgot to tell the market for 5 months. Nice one QIN. Way to earn credibility.

Improved communications will solve all the problems.

Seems that not everyone was in the dark and got the ball rolling back in Jan and Feb.