What: The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.3% in early morning trade. However, shares of TFS Corporation Limited (ASX: TFC) rose 28 cents or 15.4 % to $2.10. The Western Australian-based TFS Corporation is the world's largest owner and manager of sustainable Indian sandalwood plantations. Given the absence of any market sensitive announcement to the market, the rise in price seemed without foundation, or was it?
Why the positive price reaction?
Firstly, let's recall why this is a popular growth stock. Indian sandalwood oil is in demand from pharmaceutical companies for dermatology. It is also used by cosmetics companies as a key ingredient for perfume. For this latter usage, demand far outstrips available supply.
It seems that the share price rise is a result of spreading a very impressive story to a wider audience. Overnight at Boston in the United States, the global full-service investment bank, Cannacord Genuity, hosted a presentation from TFS Corporation. This investment bank is known to focus on growth companies worldwide.
Is there more upside to come?
In my opinion, as also stated when the shares were trading at $1.34 in 3 discounted small-cap stocks, TFS Corporation has substantial medium-to-long term growth upside. A recent $67 million institutional placement allows the company to pursue opportunities. As highlighted in the recent presentation these opportunities include:
Increasing direct ownership of plantations.
Sourcing additional quality land.
Driving demand and pricing for sandalwood across all existing markets.
Building new markets – there is significant potential in pharmaceutical and traditional Eastern medicinal sectors.
