MIDAS SHARE TIPS UPDATE: Two ways to grow profits in sustainable forests

Update 1

When Tony Dalwood took over as chief executive of Gresham House in 2014, it was a sleepy, loss-making firm with no clear direction or future. But Dalwood had a plan – to transform the company into a specialist in sustainable investments, from renewable energy to battery storage to forest land.

Dalwood has achieved his ambition and then some. Midas recommended Gresham House in July 2020, when the shares were £6.28 and the company had amassed a sizeable portfolio of assets, including wind farms, waste recycling facilities and millions of trees.

The business has grown substantially since then and last week unveiled a £470 million, £11.05-a-share takeover bid from American private equity firm Searchlight Capital.

Grow profits: Sustainable forests highlight the appeal of eco-friendly businesses to savvy investors

The deal has been recommended by Dalwood and his board, while big investors have also signalled their approval, giving Searchlight acceptances from shareholders with 33 per cent of the stock.

Midas verdict: Gresham House is thriving and has a vibrant future, but the shares have been hit by persistent market malaise, trading at just £6.82 when Searchlight swooped. Dalwood negotiated hard to ensure a decent price and those who bought three years ago should walk away 75 per cent richer as a result. While it is sad to lose another strong listed business, investors should accept the deal.

Traded on: AIM Ticker: GHE Contact: greshamhouse.com or 020 3837 6270

Update 2 

Gresham House does not just show that overseas firms see value in UK assets, it also highlights the appeal of eco-friendly businesses to savvy investors.

Foresight Sustainable Forestry could scarcely be greener if it tried. The company was listed in November 2021, raising £130 million to buy forests and sites where it could plant new trees.

Today, the group owns nearly 30,000 acres, half of it already covered in established woodland.

The rest is at various stages of development but should be turned into fully fledged forests over the next few years. The company has already planted 1.5 million trees and expects to add another 7.5 million by 2025.

Forests have several benefits. Trees suck up carbon dioxide, reducing greenhouse gas levels. Woodlands encourage wildlife, from birds and bees to plants and flowers. And forests are pleasant to walk through, for locals and visitors alike.

Commercial foresters attracted widespread criticism in the 1970s and 1980s for planting miles of pine with no care for how it looked or the natural habitat around it.

Managers Richard Kelly and Robert Guest are determined to do things differently. Their forests include a range of species, they are thoughtfully designed, and local communities are consulted before planting begins.

But Foresight Sustainable Forestry is not just about saving the planet. The group has a strong commercial core, aiming to increase the value of its assets and thereby drive long-term share price growth. To date, asset valuations are up more than 10 per cent since 2021 to £186.6 million or £1.09 per share. The stock price is lagging behind that, however, at £1 – the same as on flotation.

Midas verdict: Midas recommended Foresight Sustainable Forestry when it listed and the shares were doing well until they were hit by stock market disaffection, just like Gresham House. But the stock should bounce back. Forestry assets are in demand, their eco-credentials are hard to beat and the long-term outlook is sound. Existing shareholders should stick with the stock. New investors may also find current levels attractive.

Traded on: Main market Ticker: FSF Contact: fsfc.foresightgroup.eu or 020 3667 8100