Once again SIAF managed to present an impressive report in terms of operational performance and earnings. However, in terms of financial discipline, they have a long way to go. All the cash-flow from operations in Q2of about 30 MUSD was eaten up by a similar increase in working capital (mainly a continued increase in accounts receivables).
SIAF has so far funded to the new Mega farm by extending payment terms to one of the owners of 12 MUSD and making advances to suppliers of about 8 MUSD. Free funding of customers and suppliers for the Mega farm is partly done by printing new shares at a PER of about 0.7X, which for the shareholders is just as dilutive as borrowing money at an interest rate of more than 100%.
This lack of financial discipline will probably also have negative influences on SIAF ability to get a bond loan. Potential bond investors will probably look at accounts receivables now standing at 117 MUSD and question of they are for real.
Although, I believe (hope) that SIAF will get a loan shortly. I hope that the extended date for the phone conference until 5th of September means that SIAF will have secured a loan by then. A loan of 100 MUSD is less than 1X EBITDA and should be possible, I think.
I have added some more shares today, but I would argue that in terms of risk/ reward it is probably better to buy shares when and if a loan is in place even if the share price would rise 20% on such good news.
AI
