A few impressions from the meeting with Solomon
Personally he came across as a nice man: friendly, likeable and pleasant.He was informally dressed and gave the impression of being very energetic. My impression is that Solomon did not try to mislead by giving a too rosy picture of the situation. He did mention that they were experimenting (they way I undersood him) to find a good solution to growing the freswater prawns that appear to be quite demanding to deal with in a good way. The problem is the last phase of the growth. The prawns stop growing because of too little sunlight. One type of solution is moving to open-air water pools.
He mentioned that a storm had done some damage to one of the aqua farms. The cost of putting things right again is expected to be less than a quarter of a million dollars. It is very difficult to lie in a consistent way. My impression is that Solomon is quite open and truthful when talking about SIAF and its activities. I noticed nothing that suggested the opposite. Solomon was very willing to try to answer all kinds of questions until no more questions were asked. I had however a problem with understanding a good deal of what he said because of his way of speaking English. I guess those who have listened to the CC's can partly understand me.
Quite a few of the things I had planned to bring up had already been covered in the summaries from his Swedish meetings, and I am therefore only going to touch on a few things.
To Emptyone: I asked the question you mentioned you wanted to be raised. Solomon thought it would be a bad idea to have Triway listed on another stock exchange where it would be easier to obtain listing before Hong Kong because he believed that the p/e ratio that was realistic in such a scenario would be much lower than what ex thinks will be the case in Hong Kong. He feared that modest valuation at a different stock exchange would affect negatively the valuation in Hong Kong when Triway is later listed there. (I guess the experience from the otc versus Merkur market may have been noticed by Solomon. If there had been no prior quotation I think there is at least some chance that the pps at Merkur might have been at a higher level than it is now.)
To RD: Solomon confirmed that shares sold at the IPO in Hong Kong had to be new shares and that it did not suffice to sell an equal number of shares by existing shareholders. I asked about the expected future expenses in expanding the Mega Farm. He suggested that he hoped that it would be even a bit cheaper to expand than 4 dollars per kilo capacity, which you have expected but that the pace of expansion had a big impact in this context.
I raised the question of the use of the technology of Capital Award in other Asian countries. I got the impression that SIAF through CA would have no stake in these ventures but would receive revenues related to selling licenses and services to them more or less as it will do to Triway. These will at least to some extent give a lasting source of income. The way I understand this the implication is that there will be little need for investment by CA/SIAF to achieve this source of income. I would expect CA to be nicely cashflow positive because of the income from Triway and later from similar businesses in other countries.
I also raised the question of cash dividends. Øne alternative is for SIAF to pay so high cash dividends that these in themselves will keep the pps at a decent level because of a good dividend yield, for instance 5 to 10 %. My impression is that Solomon still has the view ventured before that the rational way to act is to consider the return on capital that SIAF can expect to achieve versus what shareholders can expect to achieve on cash dividends that are invested. The idea seems to be that if SIAF can expect to get a high return on its investments it is not in the interest of shareholders to pay a high cash dividend.
Solomon hopes or expects that when a Triway, Capital Award, SJAP have their separate listings the discount SIAF trades at will be much lower than the current market cap versus the book value. If this is the case there will be no need for a high cash dividend to keep up the stock price. This relates to the fairly distant future though. My impression is that the steps that may he needed to keep ut the pps immediately after the ex-date of the Triway stock dividend will be evaluated and decided if there is a need to to something then to raise the pps. Buying back shares could be one option in that situation.
We were three people asking questions. One of them pressed Solomon quite hard regarding collateral shres that may or may not have been sold. I got the impression that Solomon has a strong conviction that it has not happened but I got the impression that he admits that nobody has 100 % certain knowledge as to whether it has happened or not. I also got the impression that it is not possible for him to ascertain whether some of those shares have been sold or not, but I did not understand his reasoning when he explained why he was convinced such shares had not been sold. I got the impression that he thinks there has heen a good deal of shorting of SIAF on the otc.