Lets now think that SJAP has changed from being an attractive spin-off candidate, into a challenged company. Yes, lets look at the downside risk.
How would this affect profits and balance? How would this affect receivables from customers being hit by this downturn and where SJAP has considerable outstandings >3 months?
From FY2016 CC (quote below), we heard that the expectations of being favoured by Government turned to the opposite - they have closed down the SJAP abattoir on "environmental" ground. I dont know when/if it will re-open when reading the quote from the CC (why should we first expect it to permanent favour us, but when tables turned it suddenly is temporarily?). At lease we should consider these points.
Firstly, to promote economic development in the region, the Xining Government is regrouping Xining’s abattoir operations by cancelling various existing abattoir permits within close proximity to each other, with the aim of centralizing all slaughterhouse operations at SJAP’s abattoir facility and turning the Huangyuan district into Xining’s main cattle and meat trade center. This is expected to significantly benefit SJAP as it will provide it with extra land adjacent to its existing sites to accommodate and develop two abattoir operations. It will also provide additional land at another location for SJAP to move its existing operations to, including the cattle farm, the fertilizer factory and the concentrated feed manufacturing factory. To this end, SJAP has been closely coordinating with the Xining Government in recent months.
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