in the most remote place on the planet
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Sorry, again, Viking. I meant that it is clear that *if and when* a bond is underwritten, that bond will be sold.
I was replying directly to Emilez' question.
I am not an expert, but as I've written earlier on this board, SIAF has $300M in assets. Surely, something can be sold to pay off $20M if necessary -- without JV assets or LURs being a factor. They will be cash flow positive, as well.
Nothing more than I've seen posted here: 12% for 3 years. Sorry I don't know any more.
Has anybody asked Solomon if he'd consider selling the HU plantation? I have to say that I felt that Solomon had a strong emotional attachment to that farm, not sure why, when we visited it. As in all agricultural endeavors, there were challenges in the first two years. Perhaps it doesn't command the proper valuation and price now. HU doesn't produce well until the third year.
But, maybe he can sell 24% of it. That way, his growth plan can continue and he'd get needed cash plus retain control.
Clearly, a $20M offering from an underwriter in Hong Kong or Singapore will get sold. But the likelihood of raising $20M from existing shareholders seems small. I can't imagine that the latter option is a priority.
However, if it were offered, and brought in $2M -- or as much as $5M -- cash flow would be better off and Solomon would have more time to pursue the entire $20M via institutions.
Thinking about the worst case ... since the Company needs perhaps $17M to fund projects and stop diluting, if $5M were to come from existing shareholders (as debt), $3M from suspending dividends for a year, $5M from deferring projects ... Solomon might be able to pull us through the year with very little, or no, dilution.
When Solomon was asked why he can't borrow in China, he answered that he can, but that it's too difficult to repay principle and interest before the next Chinese New Year.
Having been on the investor tour in September 2012, and in Stockholm two weeks ago, I discerned a major difference in the company's attitude toward issuing new equity. Solomon has been listening! Now, it's a matter of execution rather than changing of intentions.
I think the first preference is a large bond offering. At first it appeared that the best chance for this was in Sweden. However, that seems to be dependent on the timing of Penser Bank getting SIAF to an FN listing. In Stockholm, we learned that efforts are being made to place a bond in Hong Kong or Singapore as well. It was clear to me that these initiatives are Solomon's priority. He and George are actively working on this.
Of course, such efforts are not simple. This is relatively new ground for an OTCBB Chinese company, so probably won't happen overnight. But I feel comfortable knowing that efforts are underway, plus the company appears confident.
Mention was made of giving preference to shareholders for a possible adjunct or ancillary bond at a later time. At this time, however, I believe that there is no equity rights offering being contemplated.
Rising demand for beef in China: http://www.abs-cbnnews.com/business/06/08/13/china-asks-wheres-beef
Thanks, Viking. I hadn't seen that post.
Viking, I'm sorry that I wasn't clear. My impression is that the Certified Advisers are highly risk averse, so they wanted to update their evaluation after the Q1 results were in. That prompted a few questions, which the company answered. Each step takes more time (billable, of course). I guess my personal concern is that Penser's caution slows the process, and now the end of Q2 is approaching. Will Q2 results need to be evaluated as well, further affecting the timing of the listing? I am just guessing, but that's my concern. There was no evidence that Penser is rejecting the Company, but there was evident frustration about the unexpected length of time it's taking. The good news is that we investors can be reassured by the very deep and very serious due diligence that is being performed.
Regarding timing of the bond, I heard no dates mentioned. My guess is that George put together his book (a compilation of everything known about the company) to take to his network of banking contacts, and I believe that he is in discussion with several currently. He has a sense of urgency, that is clear. He is also motivated to help the shareholders, that is also clear. Let's ask for specifics about the status of the bond at the next conference call.
Trip Report: Stockholm, May 2013
I didn't take notes during dinners or meetings, but here are my observations and recollections. I will mention things that I haven't seen posted (sorry if it's duplicate info; I only read the forum from time to time). At the Jordan Fund dinner, Solomon was the final presenter after Nexam and Cassandra Oil. He spoke informally to the group about the progress of the company since last year, and mentioned a few of the challenges they've encountered. Specifically, yields of green prawns are down a bit because the green prawns are cannibals, so the company has moved the mother prawns (I wasn't sure if Solomon meant that he was reducing the density of green prawns in their tanks, or segregating from the prawn fries so as not to lose more of them). Also, to deal with market fluctuations and minimize risks, he will begin to diversify the types of fish at FF1 raising 25%-33%, each of three or four breeds (I only remember sleepy cod and flower pattern eel, although he mentioned three or four).
The dinner provided an opportunity for me to meet George Yap, and quite a few JF members. Every Swedish person I met was friendly, curious, welcoming, and smart. As a great bonus, everyone spoke English (not during the Nexam and Cassandra presentations, unfortunately, but I got a summary). Of course, we bonded easily over our disappointment in the share prices. George Yap is a gregarious fellow, very quick, and very open with his opinions and with information about what the company is working on. He has been toiling very hard in China, capturing and consolidating all known information about the business. George brought several copies of a book he's put together (it's pictured in the beginning of hyperboy's latest video) that he developed, with organizational information, charts, and countless photos. Solomon used this material in the presentation that he gave at the Penser Bank luncheon. In addition to talking about operations, and sharing a few anecdotes, Solomon was able to show finished photos of the facilities that were under construction or breaking ground in September of 2012. He is excited about the abattoir (slaughterhouse) and de-boning facility which are projected to begin ramping up this year. He gave impressive examples of how much more each head of cattle will be worth going up the value chain (after it's slaughtered, then again after it's deboned, etc.).
I was struck by the clear cultural differences between the quite formal, proper Swedish bankers, and the entrepreneurial Chinese agribusiness team of Solomon and George. It isn't surprising at all to me that we have no news about the FN listing, as I imagine that communicating using a second language poses challenges, that styles of doing business are radically different, and that the SIAF team continues to move the business forward, possibly confounding the Certified Advisers as they work on business information that changes as time passes. It appears to be quite frustrating, and cause Penser to want to re-evaluate. For example, an updated evaluation had to be performed after the Q1 results were published. Penser's thoroughness is quite clearly the cause of the timing.
Repeating what has been posted already, bond deals are being pursued / initiated in Hong Kong, Singapore, the U.S., and Europe. Except for a bond in Sweden, these offerings will be independent of an FN listing.
That's all I can think of for now.
Pedvin, SIAF's lawyers have forbidden any new marketing or PR efforts during this period of due diligence while awaiting various approvals. This is to eliminate or prevent perceptions that the stock is being "pumped" or otherwise promoted differently than in the past. That's why the updates (website, IR, PR, Facebook) have been minimal.
Lucky, that link is restricted to authenticated users. Is the information here?
http://www.morningstar.com/invest/stocks/94985-siaf-sino-agro-foods-inc.html
Have I pretended? Perhaps you confuse me with another.
"if bond deal is scheduled in a way, that company assets are pledged as collateral, if company ever gets in trouble with debt holders, bond holders will get the assets. And shareholders - you and me - we get NOTHING.
Essentially, this next big offering can be the end of any shareholder value."
Oloos,
I am dumbfounded! Would someone post this innocently out of ignorance, or do you have an agenda?
The company just reported projected net assets over $300M with no debt. What kind of collateral do you think they'd offer for a $15M bond? Even if they offered $30M, don't you think they would simply sell something at that point to pay back the $15M? Or they could issue shares at that time.
"End of shareholder value." Are you trying to influence / sabotage / fool us?
The principal may well not be due for 5 years, while the company will be cash flow positive next year, possibly late this year.
Finally, in any signed bond, you can be damn sure that the bank will have endorsed the company's financial wherewithall.
Very obviously, we shareholders would be sitting much prettier. This is so blatently obvious that I question the reason for your post, ignorance or agenda?
I can guess, based on comments here, but I haven't been on the board long enough to be familiar with all possibilities.
Oloos, it's too bad you haven't seen the assets, properties, and growth of the company first hand. Visiting numerous company operations during the investor tour last September allayed my skepticism. SIAF is no pyramid scheme; there has been abundant due diligence in the U.S. (over and above OTCBB requirements), and much deeper investigation in preparation for the FN listing.
The "scheme" that does exist is a very ambitious, interconnected business strategy to aggressively establish market dominance in a vertically integrated manner that is designed to maximize profits in target market areas in the booming Chinese economy. These efforts are being assisted by critical government endorsement and supports. The company is in a booming growth phase, and we are just beginning to see the potential of Solomon's vision. SIAF is a long term play. Those of us who stay will be handsomely rewarded.
Even if the P/E ratio peaks at 1, investors will make 50% compounded for the next three years!
It is so hard to watch the share price each day, even though I am committed to the long term. My interpretation is that the company is as disappointed in the FN timing as we are. It seemed to me today that Solomon restrained his usual optimism, and set a lower, worst-case, bar. Perhaps he hopes that he can offer an upside surprise to us for a change.
If I think about the ridiculous hassle it has become for a perfectly qualified home buyer to secure a standard, simple mortgage in the U.S., I have more sympathy for Solomon. In what used to be a straightforward process, the timing now drags out for months, the mortgage lending bank refuses to disclose full information or timetables, then the bank changes the requirements or terms or rates, or asks for new (seemingly irrelevant) information for no apparent reason. The uplisting to FN is far more complicated, so we really shouldn't be so surprised at the time it's taking.
In the end, the additional scrutiny will add credibility to SIAF.
Download
Audio is on the web: http://sinoagrofood.investorroom.com/index.php?s=43&item=84
Benoit, my notes say that Solomon mentioned seeking bond offerings in Singapore, the U.S. and Hong Kong, and he indicated that the time, effort, and expense involved for the FN listing will provide the underlying essentials to secure the bond offering(s).
He also mentioned that this level of effort and scrutiny is new territory for a Chinese company. Indications are good, and SIAF's achieving the FN listing and bond offering will be unprecedented for a Chinese OTCBB company. For shareholders, this can only be a good thing -- even if it takes longer than the company (and we) would like.
At another point in the call, Solomon discussed marketing, IR, and website updates by saying that the company needs to wait until after the S-1 filing is approved to make changes, because of legal requirements.
Conference Call impressions ...
1. The first caller was a jerk (note: IMO there are some intelligent jerks on this forum, but this guy was just an obnoxious, dumb jerk who added no value). How can he believe that his hostility is constructive? If anything, it provokes mistrust and defensiveness, so that shareholders likely get less information. I would recommend a different approach, except that the jerk hasn't shown any ability to reason, just how to be aggressively (and unimpressively) hostile. Such a waste of time!
2. I was encouraged that the shrimp journalist Bob Rosenberry (http://www.shrimpnews.com) announced himself on the call as a SIAF investor. He asked a few good questions (about species being raised, and "flies" vs. "fries"). I'm now confused about the latter and curious about the former. I'll send an email and ask if someone at SIAF will clarify, then will post the response here. Solomon replied to Rosenberry's inquiry about EMS -- early mortality syndrome that is affecting South East Asian shrimp -- clearly, with confidence that SIAF's prawn farming methods should prevent such disease from being introduced.
3. Solomon mentioned marketing forays into Fujian province (answering my recent question on the board) and Beijing, based on successful market reception of SIAF aromatic beef and sleepy cod. He said that SIAF sleepy cod are surviving 8 days in restaurants, versus the usual 1 day survival rate. Very impressive!
4. Not all of the questions on our list were asked, and I was too late/too slow to "raise my hand" at the end (phone was asleep and locked).
5. Solomon did say that he heard that the summer holiday might affect FN timing, he also said that he will be in Sweden at the end of this month to appoint Swedish IR representatives and to move the listing forward as much as possible. He said that he and his organization have complied with all requests. I didn't interpret his comments as a known delay until late summer, but more a shared insight about what's out of his control. I'd guess that his primary purpose in Sweden will be to move the process to completion. I thought that he addressed the FN listing pretty thoroughly in his prepared remarks.
p.s. I wonder if caller #1 (the jerk) is the same person who wrote that stupid question number 19?
It's not your fault for posting question #19, I'm sure of that. Too bad I didn't notice and comment before you sent it ...
I just think the question is sarcastic at best, and more likely to be perceived as disrespectful. It won't help committed investors if we include it, although I'll bet that no one would actually ask it.
Whatever. I guess it reflects a certain point of view on this forum.
Conference Call Questions
I find Question 19 ("Do you value investors with big American eyes? ;)") to be unnecessary and to reflect poorly on the overall diligence of this group.
Is it really necessary, if we are to be taken seriously? That kind of question could easily detract from Solomon's willingness to answer the substantive questions with proper regard to the questioners.
I hope that emptyone didn't include it in the email.
If nobody objects within the next several hours, I intend to delete it from the list of questions.
Does anybody know if Solomon is pursuing / developing business interests or market share in Fujian Province? http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Fujian%20Field%20Visits%20Report_Guangzhou_China%20-%20Peoples%20Republic%20of_5-3-2013.pdf
The net margin is down for two primary reasons.
The first is the same reason that revenues are up so much. Revenues from Import-Export (and all distribution) are at lower margins than wholesale. But the income is incremental, and $55M is a huge number, much better than I expected.
The second reason is the drop in sleepy cod prices. If those prices stayed at last quarter's level, profits would have been a full $.02 per share higher.
Despite the decline in net margin, I am quite happy with $.16/$.14 for Q1!
Thanks for your kind words, mauiguy.
Why not ask about treit via the contact link on SIAF's site? (http://www.sinoagrofood.com/?q=contact)
For what it's worth, I have contacted him successfully using the "contact" link on the website.
I can confirm that treit is still a significant investor with a long term commitment to SIAF.
Well, I guess Mauiguy answered that. I have not checked with treit for approval to disclose his real identity, but I I will.
Well said, Sly.
I hope that you are correct. Fingers crossed!
Surprised and very pi$$ed off. That said, I fear there could be one more unhappy surprise, but believe the dilution will end this year. I plan to go to China again in September for the investor tour, and I think the financing shares will have ended by then. Otherwise, Solomon will find himself stuck on buses each day for hours with very vocal, unhappy shareholders.
Absolutely, although I dislike the dumping as much as any of us and explicitly disclose that unpleasant aspect when recommending SIAF. I think Solomon is finally "getting it," although I fear his zeal to stay on plan might anger us again before this shareholder-unfriendly behavior stops completely. I am convinced that we will be rewarded well in the long term for putting up with it.
Peter Grossman has no connection to Consilium Global Research.
I am sure that SIAF hosted / paid for those meals, also, Sly. Seemed like an essential element of how business is done. Just wondering out loud about possible changes, concerns, or ramifications.
SIAF's target customers are members of China's emerging middle class. I wondered if that group's behaviors will be affected by Government calls for (at least the appearance of) austerity.
Perhaps SIAF needs to analyze potential risks and make a plan to measure and mitigate.
The article also brought to mind the lavish meals we enjoyed with government officials on the investor tour, and I wonder about that aspect.
Later, I read this view of what's happening to the food market on America (on top of GMO issues), and mainly feel glad about investing in SIAF!
http://www.alternet.org/food/walmarts-death-grip-groceries-making-life-worse-millions-people-hard-times-usa?paging=off
I wonder if new policies discussed in this article will affect SIAF's businesses. Anyone care to speculate? http://www.nytimes.com/2013/03/28/world/asia/xi-jinping-imposes-austerity-measures-on-chinas-elite.html?pagewanted=all
The answers to your questions are:
Yes
Yes
Yes
Yes
I am invested for the long term. Should I be reassured by standing with a fellow investor named 'no loss' ?
There were deeply skeptical, highly informed and exceptionally alert individuals on the investor tour.
Sarcasm and personal attacks about the investors who joined the tour, however vague, are not only inappropriate -- they are wrong.
Hi TF, I am not surprised that there are buyers. Since the investor tour, I have recommended the stock to many friends, colleagues, and associates, with appropriate caveats about risk, as a solid long term investment. I emphasize that it will take 1-1/2 to 4 years to realize the value -- not to expect short term performance.
I know for certain that my evangelizing has encouraged the purchase of several hundred thousand shares, possibly more, since my return in mid-September.
Others on this board have suggested that if each of us contributes to marketing the stock in our own spheres of influence, we can help the share price withstand the torrents of financing shares. I agree with this view wholeheartedly, and will continue.
A few thousand shares here and there, acquired because of "casual" marketing efforts by each investor who understands the fundamental value of SIAF, can add up to real numbers, and help everyone.
Western China has a large Muslim population, so lamb or mutton is widely eaten in that region, even among non-Muslims.
There may be another, similar market in Malaysia for the sheep, since SIAF has business interests / relationships there.