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Viking,
I understand it is a supply contract. My point was how do they sell 800MT - 1,000MT of fish from FF1 when the supply is 600,000 fish,, and the final product is 575 grams per fish? (not to mention that contract runs through 2014).
600,000 * .575 Kg = 345,000 KG = 345MT
Could be the rest are grown from fingerlings, or other supply contracts. Not too worried about this because I trust the projection, especially as we can track it and ask on the cc. I would just prefer to understand how we get to 800MT+.
Yes, but not a lot of cash rich companies with 100% + multi-year growth and dual listing. spin out possibilities -- zero, really.
The cash balances + cash flow positive operations do surely hold SIAF's share price down.
So watching the cash flow and cash balances should help; perhaps, an inflection point in 2013.
"If they make eps of 60c 2012, the market will consider that 60c is added to the balance sheet. "
Yes, they will add even more to NTA, with grants and allowable increases in LUR valuations.
But little to none will be added to cash. When the company starts positive cash flow (on the way to becoming "cash rich") may be the inflection point for share price, because it coincides with both eliminating any possible need for equity financing and the Sweden exchange listing.
RD
Don't think near term, already announced plans are a catalyst for the share price to move the share price 4x to 10x as I was speculating about for the 5/13 time frame, especially when these plans are embedded in the financial forecasts anyway. Nor do I think there's any way the shares will get that high that fast. Course, there would be few happier people than I to be wrong on that count.
So you can say I forgot, but I didn't.
We can list a whole lot more company developments on the fairly near term horizon:
2 or 3 new fish farm contracts this year
negotiations with MULTIPLE restaurant chains
baby prawn fish sales already commenced in May
Distribution and marketing center under construction
6 retail outlets in the next 6 months
import export business underway
asparagus revenues coming
trial green house under construction
first substantial bank loan late in this year
++
Actually meant "one" could say, not that you said. Sorry.
My main point is that as time goes by and some of these catalysts happen, the company's credibility that the others will happen improves. And as the major prospects near; say a dual listing, a conservative p/e of 4 on a conservative 2014 earnings estimate of $1.25 has to be believably achievable, yet is still a share price of 8x current.
Therefore the shares are a great speculative buy even if you believe the company has a 50% chance of being a fraud.
"Just" have to get this evidence across to push the buying volume above the overhang.
$1.50 in May, 2013 would be just about the same p/e we have now. PEG ratio talk is over the top, but a p/e of 2-5?
You can argue that nothing will move share price in this space, but here are the plausible to likely events we have between now and then:
1) Uplisting to AMEX
a) Independent, Board of Director members (foreign)
b) Audit committee
c) Movement toward, if not full Sarbanes-Oxley compliance
d) Ethics Committee
2) Some institutional interest
3) Dual listing in Sweden
4) Established retail business
5) Multi-year track record of 100%+ growth in revenues and eps
6) 50% - 100% projected growth into 2014
7) Articulated plans to spin out subs to an Asian exchange
8) Cash flow positive company
9) No more share issuance
10)Dramatically rising cash balances, starting or on the immediate horizon
11) Enhanced shareholder/analyst/institutional communication
12) Upside surprise(s)
13) Less skepticism of the remaining companies in the space
More?
Actually what Solomon targeted in the presentations were 800 - 1,000MT for FF#1; 200 - 300MT for the open pond; 250MT for FF2; and $8M - $10M for the baby prawns. That's how I came up with $44M (1,400 * $25,000 + $9M).
I can assure you they will need WAY more than 3x last year's fish sales to make $145M. That would be only $15M.
In 2011 they had sales from only 1 new farm, and only for 2 quarters. In 2012 it will be 2 new farms for two quarters (roughly) + FF1 with higher capacity for 4 quarters.
It bears watching how this is tracking, and worth a cc question, I think.
But the 800 - 1,000 MT projection is for the first farm alone. Solomon made the estimate after knowing the first quarter, so I won't doubt him, unless there is more information showing a shortfall.
The new 600,000 supply contract runs through 2014, so not that much help there.
I just feel more comfortable when I can see how they will do what they say they will do.
But the first farm sold only 66.7 MT tonnes (.575 * 116) in the quarter. Moreover, the fish supply contract of 500,000 fish will yield only 287.5 MT, at the same 575 grams/fish. So, where do the other 450MT - 650MT come from? Fingerlings or new young fish supplies?
"For the first quarter of 2012, CA purchased from JFD and sold just under 116,000 sleepy-cod averaging about 575g/fish, anticipating that its production volume will gradually increase each quarter thereafter based on stocking volumes of past months, especially when the supply of the 500,000 fish contract executed in October 2011 will begin materializing sales sometime in June 2012."
Lucky,
Yes, thanks.
In Sweden, Solomon said they were negotiating on two farms he expects to start in 2012. But what you cite looks like they are negotiating for three:
"As of April 30, 2012, CA is negotiating with two other entities toward engaging consulting and servicing contracts for development of additional APM farms at Guangdong Province, and one at Xining City. The Company will continue to provide shareholders with updated information as it becomes available."
Also noticed that the new baby prawn farm Phase I has already sold 2M baby prawns.
Good stuff.
"Jordanfonden has a short brief about the Q 1 result: much stronger than expected ........"
Can you copy the commentary here?
Solomon said "800 MT - 1,000 MT" in the recent presentations in Sweden. He also said "at least 800 MT."
"44M in fish sales doesn't add up.
First of all, they will produce 500MT in 2012 from the first fish farm, not between 800MT - 1000MT as suggested by Treit."
I didn't predict $44M; I just took what the company said and applied a little math.
I didn't make up 800 - 1,000 MT; that's what the company said.
You pronounce 500; the company projects 800 - 1,000. We'll see.
They FF was on track for about 400MT annually in the last two quarters of 2011, it's first two quarters of production. On the face of it, increasing to 800MT seems doable, as more fish are "grown out" from supplied stock vs. fingerlings and overall capacity is increased.
However, I also pointed out that the Q1 fish sales number was less than Q4. They did say in the release that those fish sales will increase every quarter. So, would be nice to find out on the conference call, if the fish sales are tracking the company projections, not mine.
Viking,
Where did you get the $8M figure for non-controlling interest?
Accounts Receivable is simply not an issue. It would be if the number were twice as high AND the aging showed much of it older than 180 days. These figures are revealed in the 10-Qs.
You can expect a/r to rise as sales are growing. This is not bad.
Revenues reported on the quarter are billings. Cash flow is something else.
As for Directors, Solomon did announce in Sweden that two Independent Board members would assume the positions before 7/1. One is the head of the Jordan Fund. They will also form an audit committee and move toward Sarbane-Oxley compliance.
These are matters of public record, and also prerequisite steps toward listing on NASDAQ or AMEX.
They announced that the head of the Jordan Fund will be a Director. Don't think any poster here knows more than he does about the company. Such a claim strains credibility.
Believe they also announced an Australian with accounting background.
"To be honest I hope the Swedes have some kind of deal in place with SIAF to buy up every friggin share of the float and then list the company in sweden."
It has occurred to me that this is what Solomon meant when he expressed confidence that his shareholders would help get the share price to the listing minimum; this, plus some effort to attract an institution or two when an uplisting appears imminent.
Viking:
Where do you see 2011 fish sales of $14.41M?
As far as I know, the first farm sold approximately 200 MT or about $4.6M.
Assume you mean a trading halt related to something material; unlike SKBI mistiming their annual meeting, for instance. Are there really 2-4/ mo?
Suppose you could view that as pretty quick winnowing.
I totally agree with you on valuation; by far the largest catalyst on the horizon is the dual listing.
In today's environment, I'm not sure how we get to 2, in order to uplist. I'm hoping that their progress on both operations and recognition fronts over the remainder of 2012 and early 2013 do the trick.
At that time we will have the imminent specter of a company with a multi-year demonstrated 100% + growth rate, and 2013 guidance of $250M - $400M in revenues and $1.25 +/- earnings, plus the expected dual listing, with the spin out kicker a year hence.
But we will only begin positive cash flow, and a p/e of 1.5 leaves us a bit short.
It is encouraging that they said AMEX might relax the price minimum.
Curious if you think this projection is realistic or likely; after all, while it is a small fraction of the fantasy valuations being tossed around, it is still a triple in one year.
Viking,
Very good post. essentially right on, imo. We can see how the growth is happening in each business to get to the projected numbers.
And I agree about the retail, as per my post on that new 100% SIAF owned business. The distributing network adds 15% to gross profit, and the retail another 50% on top of that. It's a 2013+ story for real numbers, but it is starting NOW, just like the fish business really started in 2010/11 and revenues in 2012 are growing hugely.
It's interesting that Dutch prefers a conservative approach to revenues and guidance, yet keeps referring to PEG ratio, which is not only wildy anti-conservative, but irrelevant for a Chinese BB company.
I think the conservative rev/earnings outlook in relation to targets made sense for 2011. But I think the company toned down those targets, and now appear realistic, the new fish farms and fish sale growth rates being wild cards, as well as weather for HU. They are essentially forecasting tripling revenues, but to get there, they probably will need to grow Q3 and Q4 by "only" about 125%.
As we track the numbers, quarter by quarter, we'll also track the uplisting, dual listing. spin out progress. If and when those milestones are hit -- which coincide with cash flow positive operations toward "cash rich," by all rational reasoning, the p/e will expand dramatically, but not to PEG levels, which is largely outmoded and was applicable in go go years mostly to reasonably young, but well established credit worthy American high tech companies on major exchanges, with high institutional interest and lots of cash on the balance sheet.
I know I would be delighted to see a 2013 forward p/e of 4 (not 50) on $1.50 2014 earnings. If we ever see a p/e of 10+, might leave a lot of money on the table, but I could not afford not to sell.
"I honestly think that the 145M guidance for 2012 will be met or easily exceeded the way Q1 revenue came in."
vs. 80% conservative assumption
This should be question #1 on the conference call: Are you on track to meet or beat 2012 guidance?"
Can't really see how the Q1 numbers helped answer that question. one way or the other. But I strongly suspect that the answer will be yes, we are on track for two reasons:
1) Solomon issued the guidance after Q1 was over, in the first place
2) The press release itemizes so many business expansions happening so quickly
The one possible fly in the ointment is the two new fish farm construction projects. If they don't happen, or even delayed, that could easily mean $10M+ shortfall. The current rate of fish sales vs the 2012 revenue target is also a small concern.
These too are good questions for the cc.
But the strategic direction of the company, and the pace to get there is terrific.
I think the ongoing and immediate new cattle farm expansions will prove fairly major, and forging ahead with consumer sales -- both the retail and restaurant businesses -- will prove game changing, 2013 and beyond.
Course, I guess to go from $11M revenues to $55M to $145M, you have to do a lot.
Mini Whole Foods in China
The 2011 Sweden presentation talked about a franchised retail model in which SIAF would sell wholesale food as a distributor for a 15% mark up. SIAF would also make money for franchise management fees and a 2% royalty. The franchisee would mark the food up 150% of their cost, resulting in franchisee EBIDTA of $422k on $1.8M in sales.
I believe this model effectively doubles the revenue SIAF realizes as it sells wholesale as now, with the same profit as to any other wholesale buyer, but to its own wholly owned distributor subsidiary, who then sells again to the retailer for a 15% mark up.
The presentation projected base wholesale sales of approximately $1.05M sold at 15% mark up or $1.2M per 300 s.m. retail outlet. Effectively, this results in total revenue of $2.25M with an additional 150K of gross profit. The retailer would then resell for $1.81M.
From today's pr, best I can tell, this is NOT the model in the press release.
There are no franchisees; rather, SIAF is the retailer.
But we can use the figures projected. Now, SIAF will sell the same food three times:
1) wholesale as now with the same gross profit margins;
2) to the retailer as a distributor with a 15% mark up, and
3) to the end customer with at least a 50% mark up on the retailer's cost.
This way SIAF's revenues are now $1.05M + $1.2M + $1.8M = $4.05M per 300 s.m. retail store. This store is 700 s.m., so reasonable to expect that for the food that SIAF supplies, distributes and retails, total revenue will be 7/3 or $9.45M annually. And the gross profit will be the same as now at the wholesale level; an additional 15% or 365k at the distributor level, and another $1.4M at the retail level.
Solomon mentioned a target of 6 stores eoy. They would produce $42M in revenue on top of current wholesale sales annually.
So each $1 of wholesale fish, beef, etc. will now generate an extra $.80 of gross profit!
Clearly, this is another business that will grow exponentially as more stores are brought online.
That they are importing Norwegian products already leads me to believe they may eventually carry a full stable of products, beyond the food they supply. Hence, the mini Whole Foods reference.
Each quarter they collect accounts receivable and create new receivables with new billings; normal business practice.
The balance going down is good, and the absolute amount is fine. A/R will start to go up when the quarters start having higher and higher revenues.
As I recall from the last Q, a great majority of a/r was 0-30 days, and 0 was considered bad debt.
First glance, IMO,
Minor to huge Positives
1) Superb net profit margin
2) NTA up $13M, $.20 per basic share
3) More cattle farms imminent
Macau EIJI is negotiating with two groups to provide consulting and servicing contracts to build more cattle farms using our free-range system and SJAP technology; management anticipates entering into a contract with one of them in May 2012
4) Large Restaurant Business expansion
The Company is negotiating with a group of restaurant chain operators to acquire equity in their operations, including exclusivity on beef supplied to those operations by our facilities.
5) Retail way ahead of schedule
On March 16, 2012, the Company entered a 5-year lease for an approximate 650 square meter (~7000 square feet) space at the newly established Wholesale Fish and Seafood Market ... We anticipate the bulk of these developments to be completed on or before June 30, 2012, with operations beginning immediately upon completion.
6) Probable improved HU crop
For the remainder of the plantation, the heavy rain fall in April 2012 should prove beneficial as compared to the dry weather experienced in April 2011, and with all other conditions remaining equal should result in a better harvest for 2012.
7) New grant potential
Government awarded a cash grant of RMB500,000 to SJAP toward development of its Enzyme factory targeted to be completed by the end of 2012 at a total cost of about US $2 million. The HuangYuan Government is authorized to provide grant funding of up to 66% of total development cost on selected projects.
8) A/R down
9) Very good, informative press release, even slightly before extension time expired :)
Minor or maybe not negatives
1) No reiteration of guidance
2) No mention of new fish contracts
3) Fish sales less than Q4, but may be on track for 2012 projections
4) As usual, share price does nothing
Solomon has mentioned this, so he surely has reasons I don't know.
However, if the holding company essentially controls the food chain (literally) from raising to wholesale to distribution through retail, with guaranteed customers, SIAF has pricing power that competitors wouldn't; therefore, a disincentive for competitors to encroach.
Also, the further the head start, the better, as critical mass is already established.
I mention this competitive moat because it's actually one of the best reasons I can think of to raise capital development funds from equity, even at low prices. Of course, if the share price goes north of $1.50, I wouldn't mind anyway.
They did not break out the 2012 projections by division, nor did they project beyond 2012 in the latest Stockholm presentation.
They did however in the 2011 presentation, when they projected revenues of 170M in 2012 and 350M in 2013.
They did project fish sales at 800-1,000 tonnes for the first farm, and 250 +/- for the second and for the open pond, plus $8M to $10M for new baby prawn farm. Don't know how they generate sales so quickly from this one, but hope they build more of these :).
At $25,000/tonne, that's $44M in 2012 fish and prawn sales.
On the contracting side, we know that the baby prawn farm contract is for up to $21M, and that there is ongoing work to finish the second and third farms. In addition, 2 more are expected to start. When they start is the wild card, as well as how large. But Phase I of the baby prawn farm was expected to take about 4 1/2 months and generate $8M+ in revenues. So, guessing, say $17.5M (baby prawn) + $7.5M (ongoing farms 2 and 3) + $7.5M - $15M for two anticipated = $32.5M - $40M for construction, plus monthly consulting fees for completed farms.
That looks like $80M of the $145M, give or take. It's good for people to understand that the assumptions leading to 3x revenue targets are believable.
HB,
I don't really have a price target. You can justify anything you want.
I do know that huge numbers, enough to make relatively small holders rich are possible; therefore, SIAF is a good speculation, even with the most skeptical view. As they meet targets and separate themselves from the small Chinese US listed microcap space, skepticism becomes less warranted, and fantasy share price targets become less speculative.
I just want to see two parallel trajectories:
1) higher earnings
2) higher multiple
$50M BB companies (let alone Chinese) are not valued by PEG ratios, but $250M - $500M full NASDAQ, dual listed companies should get a whole lot closer, especially if the fraud stain has dissipated.
All of this is a matter of the company doing what it says it will. It only makes sense that as they've met past promises, future projections are more credible. And pretty much, they have.
I think that loans are a good cc topic. Might start with how pleased you were to see a loan being applied for, as you figure that at this stage of SIAF's development, that will limit the need for equity financing.
I believe we will see more loans as subsidiaries become bankable based on their own cash flow. I would think that the funds to green house the HU plantation could be loaned, if and when the test demonstrates success -- because that would guarantee cash flow.
In the meantime, I believe Solomon thinks full expansion will pay off even at the very high price of earnings dilution at low share price. He will not be deterred from his vision. This is a double edged sword, imo.
Part of his vision is that integrating the retail branch provides a competitive edge that will thwart competitors from pirating the fish farm technology. If that takes some equity financing, he wants to do it. Not sure if I agree or not, but he's the boss. I do know that loans are preferable, if they can manage.
Good topic for clarification on the conference call.
Logically, to bridge a possible contradiction, they may plan to issue all new equity shares at the end of the year, thereby boosting 2013 weighted average shares quite a bit, but not 2013.
Makes some sense, because of the hope the price is higher after Q3 earnings and that the uplisting/dual exchange are closer. Also, the diluted 2013 earnings will project plenty well even with the new shares.
Question is, when will they need the money? Like revenues, cap ex may be back loaded too. It is the last $10M of $80M capital development expense, if memory serves.
I hold out hope they will be able to borrow more than they currently project, and avoid dilution altogether.
It's fairly clear that Solomon has and will execute on his vision, which includes a retail branch to help protect the wholesale businesses from competitive intrusion.
Nor did I expect you to sell because they filed a 5 day extension :)
Between $15.9M and $16.0M, as per earlier posts quoting the late filing answer to the "significant change" question.
I'm slightly disappointed in that number, but it doesn't really mean anything, without the characterizations and prospects we'll learn about in the press release and conference call.
Plus, being disappointed with quadrupling yoY revenues can only happen with this company.
Maybe he meant Q2 :)
We now need to average $43M per quarter to make guidance. We know that 100% of HU/asparagus and retail are second half, and they will be working on more fish farms, and selling a lot more fertilizer and beef.
Plausible now that Q3 or Q4 alone will beat all of 2011 revenues, as long as we hear on the cc that guidance is reiterated, which is super highly likely.
Yes, I guesstimated $20M, maybe more. What's more important than the actual number is that they are on track to meet 2012 guidance. Assume we will find that out in the press release or cc in the next 5 days.
I had hoped that they sold 200 tonnes of fish this quarter from the first farm and open pond. They are projecting at least 1,050 for the year from those two. Also, I guessed 75% of the phase one baby prawn contract of $8M+ -- scheduled for construction mid-Nov. to mid-April -- and another $4M form other ongoing fish farm construction. Chinese New Year could have eaten into those figures.
Of course, there are lots of things I don't know; even revenue recognition policies could account for differences.
All in all, I expect the press release and cc will show Q1 to be a good quarter, with rapidly escalating growth throughout the year.
Wonder how many shares are held long term by the 129 I-Hub SIAF followers?
There are probably past longs, and certainly some traders, but
Hyperboy's group owns more than a million; I know there's a goodly number over 250,000 shares each. If the rest average 50,000 shares apiece, that totals about 12% of the company.
Just need everyone to invite a friend or three to buy an equal number of shares :) We'd be at 2 in no time.
I assume Dan Ritchey was at the presentation that had or could inform institutional buyers, as that's his role. Realistically, I think fund participation awaits uplisting being much closer.
Course, if Growth can bring in an Enviro Fund earlier, more power to him.
We will surely see the most exceptional YoY growth of the year in the first quarter (6x+ 2011 revenues), with the absolute numbers increasing each quarter throughout the year to total 2.8x ...
... until guidance is raised :)
Yes, must mean two new ones, as the baby prawn farm contract was announced in February; better yet, phase one construction started in November, 2011.
Let's hope the ones he projects are for a similar size, $20M.
It's not hard to project over $80M revenues in 2012 from fish consulting/construction and sales, from what we know and conservative assumptions about these two contracts, should they happen.
Same as earnings on income statement becomes cash on the balance sheet.
However, I am unclear about if this capital gain will show up as income. I think it will, but it doesn't really matter, as it's not from continuing operations.
Nonetheless, it's definitely a good thing, one way, the other, or both.
I think your eps estimate is pretty good, somewhat on the low side, if you mean operational earnings, and you change Q1 to Q2. Keep in mind that the high side of your estimate is almost 4x 2011 Q1 REVENUES.
Not as sure about Lucky's interpretation of the LUR capital gain. He is definitely right about LURs already on the books.
Frankly, I'm unclear on this. But, I think that because they are granted the LUR at the lowest possible price (akin to below even Chinese official market), they may be able to record the difference in earnings, GAAP or non-GAAP doesn't really matter.
In any case, because of this, the $6M+ will be added to NTA. And NTA will get a much more substantial boost when listed elsewhere.
Fact is, SIAF is a complicated company, with multiple kinds of JVs bubbling money up to the holding parent. And each business has multiple products and different models.
Again, agree about transparency, but what bread grass is or isn't is at such a low level, there can be 100 such questions of not only SIAF, but every other company. Do Apple investors demand to know every component and every component source and componet transportation costs for every iPhones and iPad?
The company structure and JVs can be used as a positive argument against short attacks, as the partners do provide an additional check on where the cash goes.
Let's simply ask Solomon on the call, which is within the next ten days, a couple of the issues we've raised, and put these issues in perspective.
The company actually does a very good job of providing information, as is willing to address questions to the limit SEC and reg FD allow.
Agree about transparency.
And really, for such a young and dynamic company, SIAF is doing a really good job, imo.
Solomon is amazingly forthcoming in the Sweden presentations, and in conference calls. Plenty of companies at their stage of development, and larger operational companies -- especially Chinese -- don't even have conference calls. They are getting better with press releases, as well; witness the latest PR on fish and beef contracts.
The issues we're raising -- better understanding of the "beef" revenues, and possibly yearly guidance broken by division or quarter -- are minor in the big picture, particularly as compared to most small companies.
Nonetheless, the more we and others know the better.
I am sure that Solomon would answer these questions if asked at the upcoming cc.
So, if no one else does, I'll ask.