October 29, 2007

Touchwood to Open Agarwood Oil Refinery

By Charoen Kittikanya, Bangkok Post, Thailand

Oct. 29--Touchwood Forestry Co, which operates about 2,000 rai of managed agarwood forest in Prachin Buri, plans to open an agarwood oil refinery in Kabin Buri industrial estate, expand its business and introduce new plant species.

Chief executive Pierre Maloney said the company planned to open a small-scale oil plant worth about five million baht in the first quarter of next year.

He said Touchwood would also launch a marketing campaign to attract prospective clients in the North and South of Thailand and promote the planting of new exotic species such as rosewood and African mahogany.

Founded in Thailand in 2004 with registered capital of 25 million baht, Touchwood has planted Aquilaria trees on 1,200 rai in three sites in Kabin Buri district of Prachin Buri. About 50 percent of the area contains trees grown by the company; the rest belong to clients.

Mr Maloney said the company's clientele was expected to grow by 353 percent by year-end from 550 in 2006 with the plantation area expected to rise by 195 percent from 280 rai last year.

The projected value of the harvest is about 5.74 billion baht at the end of this year, a rise from 2.94 billion in 2006.

Agarwood is a highly prized resin that the Aquilaria tree produces in response to the attack of a parasite. The resulting oil, used in incense and other products, can fetch 280,000 to 800,000 baht per litre depending on quality.

Touchwood Forestry is a local unit of Hong Kong-based Touchwood Ltd, which operates in nine countries. Touchwood Investment Co is another unit that manages reforestation of mahogany and vanilla trees in Sri Lanka and is listed on the Colombo Stock Exchange.

According to Mr Maloney, the Thai operation also plans to list on the Stock Exchange of Thailand next year.

He said Touchwood's business model focused on managed forestry, which promises lucrative returns.

Under the model, the investor purchases the trees and pays an annual maintenance fee for five years. In the sixth year when the trees mature, investors can sell the trees back to the company or to other buyers.

A 100 percent buffer stock is also offered during reforestation.

Six investment packages are available, starting from 64,500 baht for 23 trees on a 25-square-wah plot, to 2.176 million baht for 920 trees on 2.5 rai.

The company promises to repurchase the trees after six years.

As with any commodity, market prices can vary, but current contracts are based on a buyback price of 10,000 baht per tree, representing an annual return of 18-22 percent.

Investors receive a certificate indicating the plot and number of trees they hold, and expected yields of essential oils and scented agarwood. The certificate is transferable and investors are required to sign a land-leasing agreement.

Investors who opt out before six years can sell their holdings back to the company after two years. They would receive the cost of the tree plus two years of maintenance fees.


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