Long-term investors say time right to buy

By PAM GRAHAM

Malaysian forestry investor Ernslaw One holds the same views as the big United States funds which are buying cutting rights in the centre of the North Island.

If you are a long-term investor, now is the time to buy.

Ernslaw One, a company controlled by the Tiong family, expects to settle the purchase of 33,000ha of forests on the East Coast next month. The price is not being disclosed but observers are guessing it was about half the US$63.5 million ($95.9 million) paid by the previous Chinese owners, who wanted to export logs.

Despite the estate's high harvesting and cartage costs, Ernslaw One is confident it can make money.

"Obviously we think we can make a decent return," said managing director Thomas Song.

Ernslaw One entered New Zealand forestry when it bought five Crown licences in 1990, gaining cutting rights to forests in Coromandel, Manawatu and Otago.

It bought the ailing Conical Hill sawmill near Gore and renamed it Blue Mountain Lumber, upgrading equipment and expanded into finger jointing and edge-glued panels.

The company's owners have been attacked overseas by green groups but in New Zealand they are sustainable managers of plantation forests.

Ernslaw One is seen as a committed and pragmatic player that can access distribution networks in Malaysia and business relationship around Asia.

Song said forests were expensive when the company first arrived so it has also planted 26,000ha of pine and douglas fir since 1994.

With the East Coast purchase, it will have about 84,000ha of forests, well on its way to a goal of owning 100,000ha by 2010.

It is the third biggest forest owner after Carter Holt Harvey and Kaingaroa Timberlands, which is owned by Harvard Management Co.

The company will seek Forest Stewardship Council accreditation for the East Coast forests, which can be a plus in some markets. It is eyeing the potential of appearance grade wood in the forests.

Song said New Zealand had to take logs off the market by processing them otherwise prices would stay low.

The company expects to build a sawmill in the region producing lumber, clear panels and finger joints.

The East Coast forests produce 380,000cu m of wood a year and that will rise to 650,000cu m in six years.

In 1995, the Tiong Group rescued Regal Salmon and amalgamated it with Salmond Smith Biolab's fish farms to form New Zealand King Salmon, with an 85 per cent market share.

That investment is owned through Oregon Group.

The philosophy was the same as in forests: investment in resources for the long term.