KEY POINTS:
Shares of wood processing firm Rubicon have risen to their highest level in 18 months on speculation two products it developed will soon be on the market.
ArborGen, a forestry biotechnology company 33 per cent owned by Rubicon, received approval from Brazilian authorities to trial a eucalyptus tree variety that produces more fibre, Auckland-based Rubicon said this month.
ArborGen studies tree genetics to improve sustainability and productivity of purpose-grown working forests, according to the company's website.
ArborGen, a joint venture with International Paper, North America's biggest paper maker, Rubicon and MeadWestvaco, is probably worth US$100 million ($137 million) to US$150 million, said Stephen Walker, who helps manage about US$174 million in New Zealand equities, including 7.45 per cent of Rubicon, at Walker Capital Management in Auckland.
"The first of two key products ArborGen has developed are really close to commercialisation," Walker said.
"In two or three years the business will be valued at about US$1 billion. ArborGen's got lots of opportunities," he said.
Rubicon shares hit $1.00 during trading yesterday, their highest since October 2005, giving the company a market value of $249 million. Shares closed at 98c.
ArborGen has also successfully tried out a cold tolerant eucalyptus designed for planting in the southern US where temperatures tend to fluctuate widely, Rubicon said.
The company also holds a majority stake in Tenon, a New Zealand wood processor.
Rubicon posted a US$7 million operating profit in the six months to December 31 after increasing investments in two of its forestry assets in the past two years.
A decision by Rubicon's top three executives to take share options in lieu of salaries may have also boosted the stock, Walker said.
"That showed a lot of faith in the value of the shares."
- BLOOMBERG
