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Furthering, would like to see a company presentation that shows the actual revenue and profit from each type of finished prototypical business unit, followed by how many are currently in construction, with a timeline for completion to capacity.
For instance, FF1 currently runs at Phase I capacity of 1,000MT/yr, and generates $27M revenue and $8.1M for SIAF net of JV partner interest. There are currently 5 fish farms being constructed which will total 10 modules roughly equivalent to FF1 Phase 1. Three will be operational in 2013, and all 10 in 2015, when at least 10 more will be in construction.
Same can be done for cattle farms, though "prototypical" might become "average."
Same can be done for Wholesale Centers and eventually retail and restaurants.
Let prospective investors decide what that's worth.
This is a good way to look at the company.
The economics of fish farm one is something that could be on the website. The investor could draw the p/e of 3 conclusion.
Soon, the same calcs could be applied separately to CF1.
No.
Basically, you multiplied by 3 twice, when it should be once.
You don't make $32.43/kg when you sell them for $27.00/kg.
Calcs are simpler:
Gross revenue = 1,500,000 * 27 = $40.5M
Net = 1,500,000 * $10.81 = $16,215,000
Treit--You can do the math for yourself. I don't have to do it for you
Treit--You can do the math for yourself. I don't have to do it for you
If you go to the SIAF balance sheet and compute return on non-land, non-loan assets, you will see that the return on those assets approximates 100%
Gotta love "synthetic judgement."
In some respects, this forum has become your own worst enemy.
Cannot disagree more.
The vast majority of NTA infrastructure and cap ex came from earnings, grants, loans, dairy sale, and initial equity funding.
Very little - - percentage-wise -- came from issuance at dilutive prices; i.e., 30M shares for $18M. I would not mind new equity issuance at $2.00 per share. That could be accretive. Now, it is not.
The new shares are always in the denominator that determines eps, so the numerator must show a hefty return on those extra shares -- 30% in this case EVERY year.
Do you find whatever positive argument you can muster, sophistic or not, just to support your unwavering, unilateral, unquestioning faith? How about the other way around: use reason to develop your opinion. Invariably, results will show pros and cons, not all of one or the other. I'd think this approach would have more appeal when the market place already judges 180 degrees from your unbridled opinion.
Perhaps you might just post the many positives about the company that are indeed true, and can be well reasoned and articulated using critical thinking.
I think it's the role of IR to advise its clients, not just parrot.
I think that direct questions deserve direct and applicable answers, not repetitive, homogenized, narrow, replies, of a personally defensive nature.
If you can defend the marginal return on funds from new share issuance as accretive or even beneficial, go for it.
Otherwise, is it looked upon favorably in your industry for a company representative to post on a public forum; most particularly when he arouses the predictable responses you've gotten here.
How is this helping SIAF?
I've argued the dilution issue in perhaps 50 posts. And I agree with you on that.
Chad's arguments are worthless, imo. Yes, the company will still earn good money and grow. But that is because of the NTA infrastructure already in place plus on-going total cap ex, not because of marginal funds from new share issuance.
Th company is way better off admitting this, and signalling that they are pursuing alternatives.
But I don't see why you continue to imply -- actually say -- that quarterly earnings determine the p/e ratio. They don't; yearly earnings do.
2013 earnings will be $100M, not $40M or $43M. Simple as that.
So, wait until tomorrow, and if you like, tell us what you think 2013 yearly earnings will be, and why.
with 40m in net income for 2013
the CEO also stated to expect similar share issuance in 2013 as 2012 unless alternative financing could be secured.
Problem is that while new shares issued in December barely nudge the WAOS for 2012, the funds are barely deployed in Q1 the next year (now) and raise the WAOS 100% even for that quarter.
Good news, I suppose, is that Q1 '13 revenues should triple Q1 '12.
I'd be very happy with that.
Key is new distribution revenue, against possible drop in HU (weather), plus margins.
Very good 2012 results will be line one in the defense of dilution. And if results are $55M Rev/$22M Profit the effects of past dilution will be history.
But they need a much more coherent defense, and a change in policy going forward, making new shares a last resort, and then only opportunistic, imo.
Then, we'd have "normal" trading, without massive new supply overhanging every month, with the doubts it causes.
I hope you're right.
I will. In the 2012 Investor Presentation, they guided for Rev= 145M, eps= 0.68, NTA= 215m, Earnings = 56m, WAOS= 70.5m. Except for the last point (as we well know, with WAOS expected now to be 87m in 2012), all the other numbers will probably be met or exceeded.
Believe in ... the end of dilution!
Focusing solely on equity issuance without knowing the impact to operations in terms of increased assets and earnings does not paint a complete picture.
I do not know how else to explain it.
The yearly eps is calculated on the WAOS, which will be about 87M, not the final outstanding share count.
So, $60M would be $.69 per share, more in line with projections.
What would the reason be, from your perspective, close over x, with dumper MMs thin or on vacation, into FN listing?
For the immediate term, agree that two days of going up perhaps $.005 doesn't mean much.
But, is there any less reason now than any time in the past that SIAF will trade at a trailing p/e of 3+ a year from now (7 bagger from here)?
Curious Sly, even if the ask is weaker, the bid must also be, right? Otherwise the lower and lower asks would be hit.
Further, what is your guess about how much volume it would take to get us to $.55? Or $.35, for that matter.
The facilities are real, and within a ball park of service revenues.
Service revenues are coming from perhaps 4 cattle farms and 6 fish farms now, plus new fertilizer manufacturing facilities, and distribution center build out. All are there, most seen on the tour. And the revenues derived seem in order, on casual appraisal to me. Not sure you'd open them to inspection otherwise, anyway.
Cash earnings are growing dramatically also. FF1 should be $27M this year. PF1 may be $15M. Hard to say with the prawn fly farm, until green flies are sold. The cattle farms are selling increasing number of head. Mixed and organic fertilizers and feedstock have always been cash businesses. Capacity has been and is greatly increasing. Likewise, HU has also always produced cash.
Your math proving that newly issued shares at a p/e under 1 is nominally dilutive ( accretive in year two) is perhaps one part sly and five or ten parts jest.
It just ain't true.
Is the company making more eps each year? Yes, but not nearly so much as if there were no dilution.
This year WAOS will be 87m vs. 67m last year. At $.70 that's $61m in 2012 earnings. $61m earnings with no issuance would have been $.90, just about what had been projected before all the new shares.
They could have earned $.70 without issuance with only $47m in earnings.
So, your "math" says they earned $20m incrementally in year one because they increased cap ex maybe $12m with the extra 20m shares.
Since October 16th volume has been 25M. So 15M is 60%. Others have guessed dumping volume of 2/3, but that's a main variable we have no idea about. Not to mention how long shares are really held; how many are kept (or will be in the future), etc.
It's only sensible to reason that dumping supply is not endless, no matter how it feels, and that the higher the volume , the cloer to the end we are.
The key for me is that this is the last major tranche; that there is some trading time without the huge supply before and after the FN listing; and that other financing alternatives are realized in 2013.
"what's surprising is S reaffirmed 2012 eps guidance of 0.68 almost in the same breath as announcing that o/s has been overdiluted in Q3 by 14/84=17%."
~~That's what scares me. It's like he's known all along how much dilution was coming.
They would have to pr a change in plans. So, if the application is not in, it will be. The original time estimate was end of January, so March would be no surprise to me, without any extraordinary circumstances.
The minimum share price is another issue. They say that it can be relaxed; not sure how much.
Perhaps they are depleting financing shares first, tho not necessarily premeditated. Be nice to have a run into a listing, as the supply demand dynamics for the shares change.
I do think/hope that missing the published January deadline will be a cause for a new pr update.
If above speculation is true, got to be a good buy here.
OTOH, at some point, some holders of financing shares may keep some.
Whether Viking's estimate is right or wrong, 800k or 1M share days is better than 200k to 300k, as we play out toward March FN listing, which will likely free the prolific pr machine.
In turn, the listing will precede 2012 results and 2013 estimates by only a month or so; q1 2013 results by only two; and bond offering info in both conference calls.
I am curious about 2013 estimates -- and somewhat pessimistic compared to earlier projections, because I think they may take a conservative approach in estimating 2013 AWOS. This would be a setback to the seriousness of alternatives to equity financing beyond the bond offering.
On the other side of the scale, with a credible statement that equity financing will end in 2013 and take place only in a limited and opportunistic fashion, estimates will be better and pps will be a whole lot better.
Jester,
Read thru the thread for the 40% --- it was a reply to you.
Capital development expense is not equity. I am not talking about return on equity. Land value is irrelevant. Marginal has the same meaning as in marginal tax bracket.
Yes. I was agreeing with you, as you asked if we were on the same wave length.
It does refute a contention that issuance at a p/e of 1 is accretive. I don't recall that from Ecuador.
Would like to see any rationale.
So if they expect to earn $1 per share in 2013, shares can only be issued at a min pps of $2.5 in order for the dilution to be accretive. Am I correct?
Of all the implications in the dividend statement, the one I find most interesting is acceptance that 2013 income will be $1.25 (assuming 8% "total" dividend payout). I'd be happy with $1.00, even $.85, if the company eliminated new equity issuance; became cash flow positive; started retaining earnings or successfully spun out subs.
And a lot of talk about cash vs new F shares, but no talk about, "could be $4.00."
With the share issuance and dilution talk dominating this board, there does seem to be general acceptance of absolutely huge potential, if and when the company becomes cash flow positive.
At the least, that makes SIAF a good speculative purchase on a risk reward basis, even if you think it can go bankrupt.
Personally, I think that almost the only way that can happen is if it is a scam. And I consider that very highly improbable.
Do you agree that dilution above PE 1 is accredetive?
I can do the math but it won't be helpful. Let me get to the conclusion first. The issuances in 2012 at $0.65 are accretive and needed for growth.
Sorry you took it that way.
I'd be happy to change my thoughts on the equity raise (not total cap ex) helping the company in any material way, ever relating to earnings, if a cogent argument were ever shared.
However, I do agree that we don't know all the behind the scenes facts, so Solomon deserves the benefit of the doubt. This applies to the past, including the recent share issuance. And it means that he has to have some level of cash, no matter what.
Going forward, I think Solomon has had plenty of time to see the road ahead, as well as the dilution of his earnings per share and the effect of share overhang on the pps.He's had time to plan differently. If this level of issuance happens again in 2013, then he deserves no such benefit, imo.
It is perhaps true that all he/have has/have to do is suffer through this latest selling tranche, depleting all financing shares. Then he (better yet, new, real IR) issues a press release or two about new progress and preliminary earnings leading to the FN listing where share demand will not meet equal supply: essentially the breathing room RD is talking about.
Fact is, there have been many allusions to alternative means to grow. So I continue to give the benefit of the doubt. My consequence is also consequential (nice phrase).
I just don't see the benefit in saying the dilution is justified in any economic way, as it demeans the credibility of company positive statements that are true.
You cannot group the marginal cap ex (which has nothing to do with non-land) with the total cap ex. There is no doubt that all of cap ex makes a good return. That is not the issue. The issue is about the return on only the cash received from issuing shares: $15M from 30M shares at $.50.
Even fish farms pay back in 2 1/2 years according to Solomon. That's a 40% return -- very, very good.
So where exactly do you get 80%?
But let's accept that hypothetically. They have to make $12M on the $15M. Let's say they actually do that first year. It still dilutes earnings per share! Say they make $100M with 100m shares. That's $1.00 per share. With your 80% (unbelievable) return, they make $112M on 130m shares, or $.86.
And the return is not multiplicative. You can't just add the second year earnings, as the share count remains 130m. They must continue to make $12M on that investment to keep eps at $.86.
That's why the policy must change, as there is evidence that it is or will.
Of course, the math changes by a factor of 3 if they issue above $1.50.
Where do you see "several" JVs incurring expenses toward dragon head status?
We know of one in progress, but there is no reason to think that one bears much expense at all.
Further, if it did, why couldn't the expense be incurred with the first $85M in cap ex which carry no dilution, rather than the last $15M that mandates all 100% of dilution?
Again, I'll accept past issuance as a necessary evil, based on projections that did not pan out. And we are seeing the result now, as well as lower eps than would otherwise have obtained.
I simply want assurance that lessons have been learned. Indeed, this does appear to be the case based on the FN application, the bond offering references, a possible hybrid debt equity deal, and further possible business plan changes implied by Nisse before he became a board member.
If this is the case -- that 2013 equity issuance is severely constrained and FN provides new and better share demand -- we should have a very rewarding year. If not: same policies, most likely same results.
You said that dilution would be rectified in the future. Dilution comes from shares issued for marginal cap ex.
You've never explained how that is justified; i. e., how the company is or will be better off, other than with Chad like bromides.
Eps will suffer, now and in the future; overhang kills eps in the interim.
I can buy that was a necessary evil, but not that it benefits anyone. I also cannot buy that it is necessary now. It isn't.
Alternatives may avail; if not, slow growth.
Increasing cap ex from 200% of market cap by 15% is not worth 30% more shares forever.
Sly,
I really would like to hear why -- using math -- you think that the marginal cap ex only benefits the company or its shareholders.