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Green thumbs up for plantations

HAVING stared off an Australian Taxation Office attack and gained Government support, survivors in the tree plantation promotion industry appear back in vogue with investors and analysts.

The Federal Government is now being praised for breathing life back into the timber industry.

This week the Government has continued pushing the Tax Laws Amendment Bill (No 1) 2002 through Parliament aiming to introduce a 12-month rule for certain prepaid expenditure as the Government commits to “Plantations for Australia: The 2020 Vision”.

The 2020 Vision seeks to reverse the $2 billion a year trade deficit in wood and paper products.

Since the announcement by the Government was first made in October last year, the share price of listed timber company Great Southern Plantations has jumped from 35 cents to as high as $1.75 in November, before settling back to around $1.05.

The company has warded off concerns about the $6 million loss it posted in the first half of the financial year, announcing it had increased revenue raised during the July to February “off-season” by 83 per cent to $14.5 million compared with the similar period the previous year.

Given that, traditionally, Great Southern raises about 20 per cent of the year’s funds during this period, the company could potentially raise around $70 million for the full year. This would bring capital raisings back to levels of two years ago and beyond the $42 million achieved last year.

Timbercorp Limited, with a market capitalisation of $160 million, suffered a similar fall from grace, dropping as low as 28 cents in June. It has since recovered to 77 cents, more than 42 cents below the mid-2000 year high.

But the real success story in the past six months has come from Tasmanian company Gunns Ltd, which has recovered from $2.72 a share to now sit at more than $5.50, giving it a market capitalisation of $427 million. Unlike its competitors, Gunns is already proving itself through its logging and milling operations. Gunns’ successful purchase of North Forest Products for $335 million from Rio Tinto, which it had inherited as part of its takeover of North Limited, leaves analysts tipping continuing strong performances for the company.

And punters are also watching with interest as unlisted Perth company ITC completes its takeover of failed group APT, repackaging the merged assets for a listing in the next few months.

DJ Carmichael analyst Peter Strachan believes the real test for the sector will come when the rest of the sector starts harvesting in earnest next year. Only then will the financial profit forecasts be tested, he said.

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