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This is why any new IR in Sweden can point toward Asian exchanges for comparable companies and valuation metrics.
And they can publicize the spin off plans, for further validation for those kinds of valuation.
Of course, it would be a lot more believable if the shares started there at price that itself is not a red flag.
You're right that they were "free range" at CF1; not at Xining where it's pretty cold.
It's a nice moniker; don't imagine there's a lot of vegan Vikings in the world.
My poor recollection is that there were about 100 head of cattle at each cattle farm.
IMO, there would be an accounting problem if the construction fees were way more than a fair market value, because while SIAF books the revenue, the JV knows it will be repaid.
But this is an accounting principal, and the company is audited. And the company reports the contracts, as has been vetted, and is being vetted again for the FN listing.
Nonetheless, I think selling construction for one farm for cash only -- no equity -- is a great idea because it would validate the value; carry the same on-going revenue stream from consulting; and most importantly would lessen the need for overall financing.
Yes, Pros queries are valid. The point of view is valid.
However, the implication that constructing for a JV invalidates or diminishes those revenues is not correct, imo. It would be if the revenues were grossly above a fair market price. But SIAF is a fully reporting company, and those contracts are public.
Pretty sure that Pro would have no qualms about this if SIAF constructed farms for the same revenues to third parties, and did not have an equity interest.
In my opinion, they should do this -- at least once -- because it would be another cash flow positive business, while revalidating their construction pricing. They could still derive the same ongoing consulting and servicing fees they now get from the JVs. After all, it is proprietary technology; they have the license for China; and they have the only construction and operational experience in the country.
Of course book value matters. A company earning x with a bad balance sheet is worth less the the same company earning the same x. Pretty simple. For one thing the healthier balance sheet won't go out of business. For another, it's return on equity can be less to make the same earnings.
SJAP does more than sell beef. The beef currently sells for $2,300 per head wholesale, but double that to its own restaurant, restaurants in 2014.
And the abattoir offers further upside. FF1 has none of these growth perspectives.
Of course, the more they can get valued at even a p/e of 5 is not only sky high from here, it's leverage for the company.
Hong Kong or Singapore would not buy ff1 as a separate company. It's like one small factory being a public company on a major exchange. However, if it carried the rights to build more within a geographic region ...
Construction and services are not intangible. They have the exclusive rights for the Indoor fishery systems in China.
If they were to sell or franchise the technology, and build the farm for a third party, would that not be "tangible" revenue, same as any service or building company?
Just saying that SJAP figures to get a far better valuation than FF1 in a spin out. This is because it will have far more revenues in 2014, and much better growth prospects. And its book value will be much higher.
That it can indeed be spun out to an Asian exchange is another matter. The idea is that it would get a valuation based on ordinary metrics, rather than the severely depressed valuation SIAF sees on OTCBB. More importantly, in late 2014, it will be a more mature stand alone company than SIAF is now, in that it will be cash flow positive, and adequately capitalized.
First, we'll see if the holding conpany listing in Sweden gets a more normal valuation.
It is important to note that p/e is by no means the only, or even always the best valuation metric. Cash flow is probably more important in SIAF's case, as a definitive end to equity raises should restore credibility.
In the meantime, I wouldn't mind seeing Viking's p/e rubber band theory restored, with a lower band ttm multiple of even just one.
The whole JV will be spun out; it's just a question of how many shares are sold in an IPO, and how many are retained by the existing JV/SIAF/shareholders.
So the more shares (%) they sell in the Asian exchange offering, the better, as far as I'm concerned, because that means more cash for the company and more cash for the shareholders.
Where did the idea of FF1 being spun out come from? SJAP makes waaay more sense, and would command a far, far better valuation.
They create a new company that is spun out. The valuation is based on 100% of the new company, no matter how many shares are put out for the IPO. If they put out 30%, that's what generates cash. But the original SIAF controlled JV still owns 70%. We own 70%m the value of which should be realized in an increased share price of the holding company.
Swede,
I don't have private messages on IHUB. I've already been doing what you suggest. Maybe, company will help.
The cattle are about twice that size.
In valuing a sub, it does make more sense to use NTA than market cap of the company.
But TF has a valid point. We are pretty far from any spin off.
The first spin out will be SJAP.
In the interim, there will be milestones to look for:
SIAF gets increased stake in SJAP
SIAF trades in Sweden
SJAP granted Dragon Head status
Further loans or grants to SJAP
Progress on abattoir
Bull restaurants expanded or franchised
Approaching 10,000 head of cattle
Financials broken out
IPO application
Yes, SJAP is the best spin out candidate by far. Plus, it's the one Solomon already said would be first. Not sure how we got on CF1.
SJAP would be a real stand alone company. It has/will have multiple kinds of operations:
cattle sales
abattoir
feed/fertilizer
Bull Restaurants
It will grow post 2014.
Solomon threw out a value of $250M on an Asian exchange.
You can derive that kind of number with apparently reasonable assumptions. But, a la Traderfan, I'd like to see the value of the whole company get to $100M before really speculating (or $50M first).
Until explicitly and definitively informed differently, I'd assume that all authorized shares will be used in 2013. This will result in 2012 WAOS in 2013 around 115M, unless more shares are retired.
At this point, if it were up to me, the company would issue a statement using that as the worst case scenario conservative assumption for 2013, coupled with a statement that all efforts to find alternative financing are being pursued. Additionally, should the company issue new shares, it will do so as opportunistically as possible.
So,it would take revenues of $290M with margins of 40% to result in $1.00 per share.
Personally, I think margins will be lower; am hoping that revenues can be higher. If we get anything in this neighborhood, coupled with the absolute end of share issuance and the cash flow positive corner being turned -- and trading in Sweden -- hard to see how there aren't huge rewards for shareholders coming, post this credibility crunch.
Good question.
NTA is now over $200M, while the market capitalization is $37M.
That's probably the starkest indication that the market does not believe in the company.
Obviously, the spin outs can only occur if and when the markets -- on new exchanges -- do believe that the company's trajectory is real.
There is only one policy that gives doubters a reasonable argument, in my view. Obviously, it's the subject of 1/2 the posts.
There most be a better explanation of the policy; better yet, a change, as has been alluded by the company.
Then, the two numbers above will converge, even as NTA continues to increase.
HB,
My 2 cents on the dividends:
The policy is to pay out 8% of income from the previous year. This was done 1/2 in "F" shares, half in cash. This has been on schedule.
A $.10 dividend for 2013 earnings, payable in 2014, would require $1.20 in earnings. I think $1.00 is more likely; therefore, $.08.
The special dividends from spin outs are based on a strong valuation received from an Asian exchange at the time. The first is expected to be the Xining cattle operation, not FF1.
The $.30 works as 1/2 cash payout paid to shareholders from the 30% of an estimated $250M valuation IPO'ed with a 130M share count t that time. Could be less shares (not judging by history); but probably will be less valuation. Any successful spin out would be fantastically good, as much more value derives to shareholders than just the dividend, even if the total value were 1/ of Solomon's guess.
It's critical that SIAF maintain its FN trajectory, and stick to its guideline of ending share issuance in 2013; better yet, finding alternatives, as has also been expressed.
This will enable a spin out, as I have confidence that both SIAF as a whole and the Xining operation will meet critical mass by mid 2014, or within 6 months of that. The actual valuation received is anyone's guess, at this point.
Hope that helps.
The percentage of sales from products is dramatically increasing.
FF1 will generate approximately $27M in fish sales in 2013. PF1, Prawn fly farm, and all others that perhaps another $23M.
Fertilizer and feed stock sales are from product. Likewise 100% of HU sales are "cash crops."
The restaurants are cash businesses, and so are the import export and warehouse distribution profit centers, both having started sales in Q4.
As Snow pointed out, a lot of revenue comes from construction and consulting. Two years ago there was perhaps one fish farm under construction. Now there are three in operation, one at capacity, and 2 or three others being constructed.
FF1 is fully constructed, and pictures are on the FB page. When there in September, the WSPS construction was under way. The newer pictures show considerable progress, as sales were to start in December.
Also, fertilizer operations are both fully operational and being greatly expanded.
The cattle farms exist and are operating; the fish farms exist, some operating; two restaurants were operating in September; the HU fields are vast, partly "green housed, and selling.
Bonds are higher in the capital structure; get paid first. Also, their capital is better protected by the assets than equity shareholders. Even if the accounting were wrong (tho presumably vetted in the certifying process), the assets are real. The LURs alone are worth three times any bond deal amount.
Also, a bond deal might add warrants as a kicker for upside for the investors.
I'd surely expect late in 2013 rather than early.
Hopefully, SIAF breaks out financials and milestones for SJAP so that we have a better sense of when it could be spun out, how long it will take, and approximately what it might be worth.
OK, so the middle ground would be if he does not take on any more debt until 5 months from now, and hopefully hasn't for a while.
Don't get you here.
If he issues shares 5 months from now, why would the price be tied to today's price, or any price before he issues the shares?
There's a middle ground, imo.
Solomon backs off issuance now through the listing and Q1 results in May; reports $.70 profits in 2012 and whole bunch of news; guides for 2013: $300M Rev, $1.10 earnings and $350M NTA; reports $50M rev and $.20 eps Q1, 2013; then if no bond deal can be put together, issues $25M worth of shares, no more than 20M with an absolute promise that that is that.
I'm not arguing with your conservative thesis. I like it.
I'm just saying that there is justification for an upside and a downside.
The biggest downside is that the company is a scam, cooking the books. The second biggest downside is that it continues equity funding at 25% of A/S per year at sub 1 p/e for two or three more years.
As long as those aren't the case, and the company remains on the operational trajectory it has both set for itself and met, a good argument can be made that the downside is 50% appreciation for each of two years. This just arrives at a price about 1/2 its high when, as RD says, it was selling milk.
You could compare the two.
If one's health mirrored SIAF's pps the last two years, he would not be able to post here, nor probably breathe all that well.
But if one's health mirrored SIAF's operational performance the last two years, he would be running marathons.
Bit of a disconnect. End dilution; end the disconnect.
Step by step ...
People are just talking about the risk reward profile, scam on the downside ($.42 or 100%) and Sweden exchange traded p/e of 10 upside in two years ($15.00 or 3,750 %).
What do you think the upside potential is?
So, large cap eligibility is based on market capitalization, irrespective of book value, revenues, earnings?
Further, after meeting Solomon and by his actions, going private is the last thing he wants, imo. Rather, he wants to get value recognized by listing in Sweden, and later spin outs on an Asian exchange. These strategies are readily seen as backed up by the choices for the Board of Directors.
If he can get a substantial pps bounce from the FN listing and/or a successful bond offering, the single financial negative to the company will disappear.
Been a lot of water under the bridge since those projections. The business models have been reprioritized, with the wholesale centers expedited and restaurants added. Don't think import export was anticipated at that time either. Fish Farm and Cattle Farm contacts and service revenue appear on target, with fish and beef sales ramping perhaps a little slower, but acceptably. NTA looks slightly ahead of those very ambitions targets, with earnings slightly below, and eps way below.
Of course, lower eps was almost fully a function of dilution, which has simply become a fact of life.
Even with dilution, the primary SIAF story is intact: huge growth at a ridiculous price. If the p/e remains constant -- at about .62 -- then the pps will appreciate 50%/year for the foreseeable future.
If the FN listing and/or a bond offering and/or new professional IR and/or road shows and/or less skepticism in the space and/or the credibility of $225M 2012 NTA and/or the critical mass of $250M to $350 2013 Revenues and/or eligibility for fund buying and/or the end of new share issuance and/or cash flow positive operations, and/ or significant cash on the balance sheet, and/or further uplisting and/or a spin out happen, gotta believe the p/e will be higher than less than 1.
Gotta believe that if/when half the above happen, understated, the p/e will skyrocket to 2+, or a 7+ bagger from here.
If you mean the regular dividend (not special dividend from any spin out), then I assume they will stay with the guideline of 8% of previous year's income. By then, it will all be paid (vs. deferred "F" shares).
In this sense, the question becomes, "what will they earn in 2014?"
I'd guess 2014 earnings of perhaps $1.50 per share with 130M WAOS shares. (if or until we see some other form of financing).
But even if earnings were $2.00, the dividend would be $.16.
Solomon's sample projection of cash paid out to shareholders from a spin out would approximate another $.30.
Yes, saw construction workers at construction sites and employees (and quarters) as operating facilities; also, at corporate headquarters.
Saw fish and cattle too, plus land, fertilizer, HU plants, leonie's new restaurant (staffed), etc.
Actually netted $22.7M last quarter on $48.35M revenues. This is a ridiculously high net margin over 46%. I assume it is due to a very high percentage of high margin service business, and some lumpiness in revenues booked vs. expenses paid. Also, for whatever reasons, G & A expenses in the quarter were 1/3 of Q3 2012, as a percentage of revenues.
At any rate it is not sustainable with the current business, and certainly not when WSPS profits bring the overall margin down.
I could see 2013 revenues range between $250M - $300M and margins between 35% and 40%. So that's profits of $87.5m to $120M.
Spose you could argue margins of 37.5% to 42.5%, so $93.7M to $127.5M.
Of course, I'd be happy to be wrong, if I'm on the low side.
It will be interesting to see how the historic extreme seasonality moderates, I believe substantially in Q1 2013.