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I'm simply saying that when all the equity stakes increase from 25% to 50%, for example, that's 100% built in growth rate, not even counting selling more fish. But when 1/2 of the farms are already 75% owned, the growth rate on those, and therefore all will reduce.
This can be offset by other factors, It's really a minor point, and has no bearing on 2012 or 2013, probably not even 2014. But the original post referred to 3+ year eps growth rate projections, which is highly conjectural anyway.
Agree that we'll adjust as we go. Pretty hard to project one major branch that has yet to report a quarter, and another that doesn't even exist yet.
I would throw out as a metric that the existing WSPS has a capacity to store and move 100 MT of seafood per week. At $10/KG, that's $1M per week, or the $50M/yr you've estimated. Not sure what % of capacity they will ramp to, but this does not count beef, which will also be distributed through the same facility. That portion of construction is expected to complete Q4.
Further, import-export sales to other countries, which has already begun, will generate unknown revenues that may be categorized within this division. Do you break out import-export with another number?
And, 2013 may bring another distribution center, within the same huge complex or elsewhere. Who knows?
There are two kinds of retail being contemplated: smaller, organic only, branded stores and a much larger marketplace for SIAF and other organic retailers, blending old and new kinds of shopping. I believe Solomon mentioned 10,000-15,000 s.m for this space. This is 3x-5x times the size of an average Whole Foods store, which generates about $25m - $30M revenues.
These are the factors that may make Swede's projections of perhaps well over $300M (I assume) come true. This, on top of perhaps accelerating building new fish and cattle farms. I think they may be running up against full use of fish farm construction and consulting expertise now. But who knows, might double the manpower within 2013??
Anyway, fun to speculate about the upside potential. And like you say, we'll adjust as we go.
Would add that retail is an even bigger unknown, revenue wise. Curious what you've included for retail in your 2013 model.
Along with branding, it's the third peg that completes the strategic whole, establishing a built in, guaranteed customer for the JV wholesalers ( through the distribution network).
Snow,
From the 2012 first half presentation:
"Currently the Company has 1 fully operational and 3 additional aquaculture farms under development."
then,
"Open Dam farming provided 149,000 “Sleepy cod” fish for stocking operations at Fish Farm 1 and 151,000 fish were sold to wholesale markets averaging 514g/fish."
So, seems to me that SIAF does derive revenues from open dam farming.
Viking,
Agree with everything you're saying about declining margins, declining rate of revenue growth as fish and cattle farms approach capacity, and more shares. Amazing that even with the above, can reasonably project 50% eps growth.
To Swede's more optimistic outlook, I'd agree that there are important upside probabilities (maybe offset by other downsides; maybe not. These upsides include:
As the fish and cattle farms approach capacities, the distribution network and retail establishments will be in the earlier, heavier growth phase. Also, restaurants may be expanding a a much greater overall rate than the company as a whole. This will have a very strong influence on margins for cattle, fish and HU. Next, as the fish and cattle farms approach capacity, their percentage increase in sales revenue will decline, but the newer ones will be ramping at the highest rate, as percent equity increases from 25% to 50%, increasing profit from those farms 100% with no sales volume increases. And finally, if the bond deal happens, and/or financing is done at a much higher pps, then the newer, consequent investment -- perhaps in a very large retail network -- will add eps proportionately higher than the company overall, and we may not get to 100M shares, at least not in 2013.
Then what does this mean, from the Q1 report:
You really think they don't book the revenues?
I'm rooting for you to be right.
And I don't rule out multiple year 100% revenue growth; to my view an optimistic scenario.
Geez,with anything approaching that while dual listed on major US and Swedish exchanges, we should all be very happy. (well, maybe not Joe N.)
I don't disagree with your conclusions, in general.
But there are still important numbers we don't know:
1) Even if the new ff and cf construction pace is maintained, that portion of revenue and income would be 0%; it may well increase, but it does not have the built in increase that fish and beef sales have.
2) As a larger percent of FF are producing at capacity, and 75% owned, the later year growth will necessarily decline percentage wise. (from phenomenally good to good).
3) Huge revenue growth is likely in WSPS and retail, as they start from low bases. But we don't know the margins. In any case, the increase will be less 2014 over 2013 percentage wise, and much less 2015 over 2014.
4) Share count; always a fly in the ointment up to now.
5) Wild cards. The entire restaurant business came as a surprise. There may be more upside surprises. Or, there may be downside surprises; e.g., contamination in a FF, disease at a CF, unforeseen competition in fertilizer, etc.
I meant 50% eps growth 2013 over 2012. It's hard enough to project 2013, let alone beyond.
We can all see that the model promotes growth. But we've yet to see the first report of income from distribution, though it has started ahead of schedule. And retail has not even begun. We are even unsure about how many fish farm contracts will be signed and worked on in 2012.
So, the growth rate in 2014 would be based on even more guess work.
You do not see really any companies guiding more than a year in advance.
But what I would love to see SIAF do when issuing 2013 guidance, or when they are in a position to address institutions or analysts is make a statement about not only the sustainability of their earnings, but the sustainability of growth that is inherent in their models.
To grow earnings, most companies have to grow revenues and maintain margins. Because the fish and cattle farms all have a several year ramp up to capacity -- and more importantly because SIAF will have increasing equity shares -- income growth is already baked into the cake, particularly post 2012, more so post 2013.
This is pretty much a unique selling proposition. It's one thing to project $1.50 eps vs $1.00 YoY; it's quite another, much more credible projection when this model is communicated. The eps growth will happen automatically.
Each year, each FF will sell more fish (automatic eps growth factor #1); there will be more FFs selling fish (automatic eps growth factor #2); SIAF's ownership stake in each FF will increase (automatic eps growth factor #3). These factors are multiplicative.
.
2013 guidance will be super informative. I'm guessing 100% revenue growth, 50% eps growth, in very round figures.
Margins in 2013 will be less, as a larger percentage of business will come from lower gross margin distribution and retail businesses, which also pay higher taxes. There will also be more average weighted shares.
You're signalling well over $1B in 2015 revenues. Not sure they can grow that fast for that long, but will be fun to watch, if they are anywhere near. The models do scale, so ... , but the ramps per FF/CF have been slower than hoped.
Food prices will not increase 20% - 40% for the next few years; least not without riots in China. Sleepy Cod wholesales now for $27/kilo now. 30% for three years would peg it at $60/kg.
Okay, seems we're in agreement that shares will not be issued for FN listing, and also that Solomon has an expansive appetite with many ambitions yet to hook into his diversified, integrated model.
So, I also think it not unlikely that even with a bond deal, the 100m shares will be reached eventually. But as shareholders, the timing and manner in which that happens is more important even than the ROI for whatever the cash is used for.
It's vital that any new issuance -- any not already committed by virtue of supplier or other debt -- be at far higher prices, after the FN listing, perhaps after further uplistings, and after a bond deal (if that succeeds), and done with a proper secondary.
Pretty confident that Solomon can get a 50% ROI on expanding the distribution network or starting the retail in a big way. If he invests, say $10M in either or both at current prices, he increases the share count approximately 16%. So if he were to otherwise make $90M on 90M shares, he'd make $95M on 105M shares. EPS goes from $1.00 to $.90. There would be strategic value, and probably greater earnings in later years, but still the dilution is pretty bad.
But if sells the shares late in 2013 after a couple uplisting/dual listings at say $3.00 per share, then he'd make $95M on 93.3M shares, adding $.02 to eps.
Yes, that adverb was for you.
Big difference tho between issuing shares to pay debts committed in advance vs. to create a larger float that will happen by itself.
Also, a big difference between characterizing an act vs. a person.
Liquidity is the average daily volume. And that is determined by the price moving to where there are willing buyers and sellers.
This is exactly what longs want; a new audience for the shares, including institutional and analyst coverage.
If trading on FN creates an influx of new buyers, issuing shares to sell to them would be savagely stupid, when the share price will take care of that.
We may get 100M shares, but it won't be to feed a FN float, and it won't be until well after the SIAF commences FN trading. And if needed, hopefully new shares will be at a price that the new supply demand dynamic boosts considerably, later in 2013.
Swede,
Exactly! That's the whole idea behind the dual listing and uplisting strategy.
Even now, it looks the shares hold their own on good news vs. tanking as in the past. Meanwhile whatever financing shares still outstanding can only be decreasing, despite MBAY's appearance.
Have to believe that with the actual dual listing, particularly if coincident with a bond offering, this market dynamic/psychology will change dramatically in our favor.
Maybe we meet JF's guess of a p/e multiple of 2.5 - 5.0.
Because this scenario is logical, and even conservative, and only three months away, I'd think there are people building positions in anticipation, apparently just not enough in the very short term.
Agree that financing shares are an issue, clearly. But, it can't be financing every single down day. There simply weren't that many issued.
You always reference MBAY. Have you ever counted the number of shares they've traded?
Pretty cold there in January, I bet.
Don't know about others, but this just seems fully unrealistic to me. I'm as bullish as anybody, but I'm not drinking the Koolaid enough to say that people won't sell a $.65 stock for $5.00. Would anyone say that about any other company?
Again, $10,000 worth of shares becomes $75,000; $200,000, $1,500,000.
If shares are registered at FN and only a very small % of those want to sell, then the price goes up to meet any new demand. That's good, isn't it? Sort of the opposite of what we see with so much selling pressure now.
The liquidity will come when the price equalized the supply and demand.
The original question asked how much would people sell at or before $40.
I asked because people seemed to think the strong hands would stay. I'll take as facetious your "opportunist" comment about my selling most of my shares.
To think others here wouldn't is folly. Every $16,500 worth of shares at current prices would be worth more than $1M at $40.
Whole thing is quite hypothetical, obviously, as we have to jump $.70 before we get to $40 in 2016.
More pertinent question is how many shares will get sold from strong hands (or traders) up to $1.00?
Afterall, there will be 80M shares traded in 2012; they aren't all financing shares.
Why would they need any additional shares at all, even within the authorized total?
Wouldn't most Swedes trade there naturally?
If the shares have to be registered at FN, wouldn't there be time allowed to shareholders before trading commenced.
Don't really think we need to see the FN listing as a means to issue more shares. I suspect it's the opposite: a sensible way to gain exposure; hopefully, to be reflected in share price.
Therefore, even if new share do need to be issued, there would be less. And hopefully none, as a bond deal materializes.
The share price could be $40 with a p/e of just 1, by feeding about 1% of the Chinese population.
Guess you'll be holding to $400 or $4,000.
Curious how many current strong holders would still own their shares at $40, and based on what?
I know I'd have far, far fewer, no matter what, and zero if the valuation were over extended.
Yes, I remember; also, a round table introduction to the CEO. They have existing branding and halal certification, among other things.
Still find JV'ing the new abattoir clever.
I surmise that Solomon's clout in negotiations stems from his relationship with the government, and from the mutual benefit the business model affords local farmers, employees, and consumers.
We've now had two press releases in three days, and neither were the ones we expected. Seems we are indeed past the summer, with a steady stream of news to be released.
In yesterday's news, I found this line interesting:
"The Company is also in negotiations with a reputable and experienced local meat processing company to form a joint venture partnership in developing a slaughterhouse and boning facility adjacent to the SanJiang property."
Perhaps Solomon has found a way to include the abattoir in his bag of revenue tricks without the capital development expense, in the same way the fish farms are built??
Okay, then, me too.
But there will be fewer shares issued, maybe very, very significantly fewer (if the bond deal happens) and there's a strategy in place for them to be issued at higher prices, maybe much higher.
Doesn't hurt ether that loans are now happening at the sub level.
So less dollar weighted volume.
Yes, Bear implied those other bearings.
Well, we'll see into the close today. Problem is Sweden is closed, so suppose that lowers the likelihood of a strong close, but increases the bullishness if it were to close HOD.
The whole promise of financed share being overhang is mostly supported by the educated guess that the holders have to sell. So they can't leak out 10,000 a day because it takes too long. And they can't put in a market order for 1M shares cuz they'd get filled at $.40 or something.
The same is true in reverse for someone who wants a new 1M share position. Buying at 10,000 shares a day would push them past the time and the catalysts that comprise the reason they take that position.
My hope is that the operational glide path for the next 18 months meets a new share supply and demand dynamic, dramatically changed by trading in Sweden and less shares issued to fund capital development. This is starting now, but just starting, and it is not 100% guaranteed.
But the plan is in place, and actions are being taken. The sooner the plans evidence and the dynamic shifts, the better. We'll see if today signifies a one day victory or not.
There will be more battles.
Bear,
Good post.
I do hold hope that a bond deal limits or eliminates the need to exhaust the authorized shares in 2013, which will be the last year of equity financing, no matter what.
It is possible that even with a bond deal, Solomon will issue more shares.
But having been there and talked a bit about these issues, I think:
1. He is getting good advice from people who can and are helping advance shareholder friendly moves
2. Share issuance at a good price is a very good thing for a company growing this fast.
3. Because these new measures and strategies have been tailored in 2012 for 2013 ; if successful, they will greatly improve the company's ability and flexibility to raise money more smartly and opportunistically than here in 2012
Meanwhile, for all the TA experts out there, wouldn't a green close on the high of the day, o n a high volume " dumping" day be quite bullish?
If anyone is claiming that new financing shares are issued and immediately sold coincident to good news, that strikes me as conspiracy theory, if not slander.
I do think it likely that financing shares are stored for sale, at least to a large extent, because for me that's the best explanation for huge volume spikes from market makers known to be around for those days and on the ask.
Other than financing shares, hard to see where all this kind of selling volume would come from.
Over time though, the trading "should theoretically rationalize." There will be about 85M shares traded this year, with at most 17M financing shares liquidated.
Next year, the ratio will be less, maybe even 0% issued shares.
Sly,
I don't find it coincidental.
If I had 2M shares I wanted to sell, I'd wait for an opportunity that figured to have volume buyers. That simple.
You can call that coincidental if you want, but a 50 to 1 shot?
Eventually, financing shares wherever they stand will be entirely bought. Solomon aired his plans which included 2013 shares. So, agree that it's useless to complain. The share counts from this board are just guesses.
We can take hope that a bond offering will limit or eliminate new shares, and that in any case new shares figure to be less than in the past.
Further, at least today, whatever shares are being offered are being bought up, for the most part at reasonable prices, given the huge supply.
Still would like to see a steady stream of press releases:
1) Cash Dividend
2) New BOD independent members
3) New contracts
4) Q3 results
5) FN progress
6) Bond offering (??)
I'd imagine that the actual FN listing will have a much, much bigger impact than the announcement and subsequent publicity, as I'd suspect that's when demand from Sweden will jump. Prep work can't hurt; especially, putting on institutional radar, and advertising as the first move in a string of upward uplistings, culminating in spin outs.
For real upward price pressure, still need to change the supply demand dynamic in a fundamental way. Today's announcement is a good first step. Would like to have seen it cause a jump over the $.73 mark. We'll see.
p.s. What is a "bloodbowl," and why be a fan?
Thanks to Solomon and perhaps the new BOD for following through with what they signaled!
Sign of more to come.
Hoping that this new press release gets a lot of exposure in Sweden.
I agree that the company is tracking a listing in early 2013. Further am hoping that this is part of a fuller strategy that is articulated, perhaps in a conference call, whereby:
1) Approximately concurrent with the actual FN listing, the company pre-announces preliminary full year 2012 results, and 2013 guidance
2) A bond deal is also being worked on, ideally to be announced approximately concurrent or a couple weeks after a listing
3) FN listing and both of above are efforts to maximize chances for $2.00+ pps, while AMEX listing is prepared
4) AMEX listing is jump point to dual Sweden uplisting
Of course it's not a requirement.
If you were going to underwrite a bond deal -- better yet if you were going to buy into a bind deal -- wouldn't you want the listing, especially if you were Swedish?
Doesn't mean the listing and the bond deal are linked or would happen concurrently. As I said, in the best case, the FN listing happens first and influences the exercise price of the warrants in the bond deal that follows.
The bond deal would help SIAF share price not only because it limits or eliminates equity offerings, but because it's a tremendous vote of confidence at an institutional level.
Vike,
Not sure if the FN listing and a bond deal are linked or not. The ideal scenario is that they are not; that the listing occurs first, and has the P/E impact JF predicts.
If this happens and the bond deal follows after, I'd think the bond deal would also have a great effect on pps.
Ideally, the combined catalysts are followed by 2012 full year unaudited results pre-announced in February as (for instance) $130M - $145M revenues and $.60 - $.70 eps.
Further, if they follow with 2013 guidance announced in April as $250M - $300M with >35% margins, and are in sight of both an AMEX and Swedish uplistings, we may actually want a further proper secondary lifting the share count toward 100m.