Quintis reveals identity of offshore sandalwood buyers after ASX inquiry – The Australian Financial Review

Quintis founder and managing director Frank Wilson topped up his stake last week by 50,000 shares.

Quintis has conceded its biggest customer in China, Shanghai Richer Link, has not ordered any shipments this year but the sandalwood group has advanced talks with other buyers in China amid alleged customs duty avoidance by other importers.

The company has lost 22 per cent of its market value since short-seller Glaucus published explosive allegations last week likening Quintis' business model to a ponzi scheme and estimating its equity was worth zero. The former TFS rejected the claims as untrue and self-serving. With a declared short interest, Glaucus stands to make money when Quintis shares fall.

On Monday, Quintis sought a trading halt to respond to questions posed by the ASX following its dismissal of Glaucus' claims. The ASX wanted to know who the company traded with, and more details about the "inaccuracies" identified in the short seller's research report.

"Just because an activist US-based short seller makes various claims, claims which it stands to benefit financially from, does not mean those claims are true," Quintis shot back. Among its conclusions was that Glaucus failed to distinguish between high-value Indian sandalwood which it has sold at more than $US4500 ($5900) a kilo and other, cheaper varieties that change hands for around $US550 a kilo.

"Glaucus has performed a highly flawed and, as a result, misleading pricing analysis as surely as if they had analysed the price of BMW vehicles by looking at import data for Kia vehicles," Quintis said. Sandalwood and its oil are used in religious carvings, as prayer beads, as well as in cosmetic and pharmaceutical products.

Authorities in China have cracked a sandalwood importing ring that it is alleged failed to properly declare the value of unidentified sandalwood originating from Australia. Quintis distanced itself from the investigation, where only one of its employees in China was interviewed. Shanghai Richer Link officials were also questioned but no charges were laid, the Perth-based company added.

It extended its own diligence last year when a law firm was commissioned to review Quintis' export documentation to Shanghai Richer Link, completed this year, and found it to be compliant. Shanghai Richer Link presented no credit risk, in Quintis' opinion, and it paid for orders upfront.

Previously, Quintis had declined to name the other parties to its sales agreements, beyond saying they are in China, India, the Middle East and the United States, and citing commercial confidence. In November 2016, the company's chairman told shareholders that "the vast majority of our harvests through to 2021 are now forward sold".

It has gone a step further in response to intense scrutiny of its operations and unmasked its Chinese client as well as Medinext General Trading as an associate of a client with a two-year deal and a three-year extension option in India, North Africa and the Middle East. International Flavors & Fragrances or IFF and Paspaley were named as uncontracted customers of its high-value Indian oil and wood, and Givaudan was a significant buyer of lower-value Australian oil.

Asset manager GMO was identified as the new institutional plantation investor alluded to in 2016.

In February 2016, news of major supply deals sent the shares rallying.

Quintis was a target of short sellers before Glaucus made headlines with its freely distributed 39-page report. According to Australian Securities and Investments Commission figures as of March 21, 14 per cent of its shares are in the hands of short sellers. Founder and managing director Frank Wilson topped up his stake last week by 50,000 shares.

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Quintis reveals identity of offshore sandalwood buyers after ASX inquiry - The Australian Financial Review