AI
Monday, January 24, 2022 10:03:00 PM
PHIL Conference Call Transcript - 01/20/2022 - Transcribed by msb341-Lady Di
Ladies and gentlemen,
Thank you so much for taking the time to join our shareholder/investor conference with PHI Group today. I noticed some of you came in quite early and thank you for your patience to come in early to reserve a spot and this time we have ah ah plenty of room for everybody so it’s good, nobody will be excluded from the call like sometime in the past we didn’t have enough room and some of you can’t get in and now we don’t have that kind of problem.
I know it’s been quite some time we didn’t have a conference call update/review but um now I think this is a very important juncture. We have a lot of important news that we want to share with our shareholders and also new investors as well. Before doing that I want to thank you again for taking the time to join us today.
Slide:
Part of the presentation as a routine caveat is that you know there are forward looking statement in these presentations that may contain different terms and words like uh “may, plan, well, should, anticipate, etc” that talks about things in future which are subject to uh a lot of risk and uncertainties that could cause future circumstances, events and results to differ materially from those we think will happen that were projected.
So we need to be mindful of that. And um I have repeated myself quite often, you know our stock is a microcap, nanocap stock. Very volatile. Can be very risky. So you know, Some of you say “you don’t have to say that” but I have to because it’s not appropriate, it’s not suitable for everybody and especially those of you who are older, and have accumulated your uh, your cash, your wealth over the years. You don’t want to put all of your eggs in one basket, just in case anything happens, you cannot afford uh that kind of risk and loss.
So please keep that mind. And uh,this stock is not for the feeble hearted. If you cannot uh take the risk please don’t, don’t get involved. Because if you, if you get involved and if something doesn’t work out and then you come back and blame yourself and blame the company and people, your friends and those who recommend to you and I don’t want that to happen to you. And, you can always VOTE with your feet!
If you don’t like it, uh find something else, find another company to invest into, you know because it’s only appropriate for certain people. Of course, there is a lot of potential going forward, but there’s also, also risk and uncertainties. So I want to make sure because I have that fiduciary responsibility um with our shareholders and investors in general.
Excuse me, let me, someone is trying to text me. I have to ahh…Sorry about that. A shareholder is trying to enter the room.
With that being said, um,
Slide:
I want to just go a quick overview of our company. Many of you are long term shareholders, you already know, so we don’t have to go over again. Ahh, but um, some of you are new so you know I will just go over quite quite quickly so um you have a good understanding.
You know, our company has been around since 1982. Stock symbol: PHIL. We have a lot of shares authorized. We are not going to issue any new shares yet. Uhhh, we have total 60 billion shares authorized and 28.7 Billion shares issued and outstanding, and that is of the common stock. The preferred stock we have 600,000 shares issued and outstanding. Those are not convertible to common stock. They just have voting rights but they don’t have conversion rights.
Slide:
Our corporate strategy and scope of business. Our strategy is to build and deploy valuable resources with distinctive competitive advantages. And uh, we participate and compete in businesses that have large, growing market potential and we create long term value by and provide points of exits for investors through either capital appreciation and sale and spin off of our business units.
Right now our scope of business includes Luxembourg bank funds called PHILUX global funds and a number of subfunds to invest in real estate, infrastructure, agriculture, renewable energy, healthcare, etcetera. One of the focus of investment for the Luxembourg funds and for our company is the Asia Diamond Exchange. Yeah we spend probably about 4 years working on that and because of the COVID situation there have been delays but I now expect to get the Visa to return to Vietnam in a couple weeks after the lunar new year day to continue to work on the ground there. But that’s something we will talk about at another time in more detail.
And we have the advisory and consulting services under PHILUX capital advisors. We provide merger and acquisition and consulting services to private and public companies. We took the first Vietnamese company public at NASDAQ after we were very instrumental in that capacity. And right now we have just signed an agreement with CT Farms in Vietnam to take that company public on NASDAQ. I’m so communicated with uh Mr. Robert McCooey the vice chairman of NASDAQ. We come back and meet with him again. We used to work very closely with him and his staff in the past. But now is the about time we can bring some up with him more prominent Vietnamese companies public in the US and list on NASDAQ.
Please excuse me, I need to take some water.
And then ah, you have mergers and acquisitions. We participate in M&A activities as a principal meaning we acquire companies for ourself and we also provide advisory and consulting services to clients for a fee and for equity in those transactions. That’s our model.
And then we also invest into special situations ah like the ah The ah 5 grain/empire spirits transaction is a special situation.
And, we uh also engage in crypto and blockchain technologies especially with the launching of the CO2-1-0 carbon corporation ahh, carbon mitigation token headed by Mr. Choky from Indonesia.
And then um, we also have a few more things but it’s too early so we will share with you later on that.
Slide:
And we have a number of subsidiaries. The more prominent and active right now is the PHILUX Global Funds, Luxembourg Bank Funds, Philux Capital Adivisors M&A consulting and investment advisory services, Asia Diamond Exchange which is the holding company for which the Asia Diamond Exchange is to be established in Vietnam. We will share more with you about that in the next few weeks. There have been a lot of exciting developments and it’s been getting better and better everyday for us. We are so fortunate, so much blessing. We are the ONLY COMPANY in the world that is doing this transaction. And uhh, It’s not by our own intelligence or ahh, because of that we are smart or anything. You know it’s a combination of Grace and hard work and also the goodwill of people all around the world that have come together to make this happen.
And then ah, we have American Pacific Resources that are engaged in mineral and natural resources. We still have the gold mine claims in Oregon and we haven’t been able to develop those yet but we have been in talks with uh, some potential partners in Asia, especially in the Philippines and we will share with you in the coming days. This has still some more work that needs to be done before it makes sense to distribute the dividend shares from this subsidiary to our shareholders.
And then Vinafilms International actually is the new name. It used to be called American Plastics, Pacific Plastics but we just changed that name to Vinafilms International and we expect to share with you a few very good things about it in the coming weeks. If not next week it will be in the coming weeks. Hopefully we can do that next week.
And then Phivitae Healthcare uh, is in the healthcare and medical industry. We are working with a joint venture in Vietnam right now and we will announce when it’s ready.
And then Empire Spirits use to be called Provimex. It was a subsidiary of PHI way way back in 2004 and we established the company as an import export entity. We did some business and um, instead use the company as a holding company for some potential acquisitions. But you know the target companies didn’t work out so we still have that vehicle and uh it’s been seasoned and can be turned into a public company fairly quickly once we bring um I mean The Five Grain under our belt.
And the Carbon CO2-1-0 Carbon Corp is the carbon mitigation carbon credit subsidiary headed by Mr. Choky.
Slide:
Luxembourg Bank funds, is Global funds with a number of compartments for investment into different industries. The are of focus for the funds.
Slide:
Initially we were focused on the real estate aspect because ah you know we work through the funds and also a JV in Vietnam to develop and build out the Asia Diamond Exchange so it will be going through our PHILUX Global Fund Real Estate component.
Slide:
And special situation we mentioned and merger and acquisition. We had some very significant success story in the past. We were instrumental in taking the first Vietnamese company to the NASDAQ stock market, the Cavico Corporation. We spun up a subsidiary of PHI Group with ah, called ATC technology and we completed a merger with a cellular biomedicine group and upgraded to the NASDAQ stock market under the symbol CBMG way way back and the company also went through some changes but it was at one time very prominent and traded like for $40 per share and a lot of our shareholders at that time received a dividend from this spinoff.
We also listed a company, a subsidiary of ours called Philand Ranch, on the Frankfurt Stock exchange. Unfortunately timing wasn’t right, it was uh, as we was launching it and then the global financial crisis happened and then we couldn’t pursue with the development of the 491 project in central Vietnam at that time.
Slide:
Now lets talk about the 5 Grain Treasure Spirits. Some of you have already heard about this company. When signed the let of intent we had a brief presentation so some of you are familiar with it. It’s a Baiju distiller with a 100 year history in Jilin Province in China, northern China. It has a excuse me….It has a proprietary spirit production process. It has patented technology to grow red sorghum for baiju manufacturing. The patented grain produces superior yield and quality compared to the regular grain that are grown by the farmers that don’t have expensive technology. It’s a reputable bulk alcohol supplier some of the largest spirit companies in the world, including the Kweichow Maotai which is largest beverage liquor company globally right now.
Slide:
The 5 Grains Treasure transaction. We use Empire Spirits, a subsidiary of PHI Group as a holding company ahh, to hold 75% (I believe he meant 70%) equity interest in 5 Grain Treasure Spirit Company. The total purchase price is $100 million to be paid in 3 tranches. The first one is in March, ah March 18th, June 18th and September 18th of this year. According to the agreement the closing dates is scheduled for September 18th 2022. However we can and we plan to close it sooner as soon as we pay off the full purchase price. We will complete a GAAP audit according to the requirement of uh, the PCAOB, public company accounting oversight board registered to practice before the SEC. It just cannot be any auditor but it has to be registered with PCAOB to to do that function.
I’m sorry I need to get….(coughing)
And then we’ll be able to consolidate the financial result of 5 Grain with PHI Group’s financials. Our plan is to transform the post acquisition companies, both 5 Grain and Empire Spirit to something quite spectacular and we’ll list it on a major exchange. And potentially we’ll be able to distribute meaningful dividend to our PHI Group shareholders.
Slide:
And our growth strategy for our 5 Grain Empire Spirit is uh, threefold, three prong. We do joint venture with growers to produce 500,000 tons of sorghum per year. And uh, we supply up to 230,000,000 liters of bulk spirit to beverage companies including the top brand in China. And we will develop our own brand and with proprietary manufacturing methods and preferred distribution channels.
Slide:
Some of the, let me see top brand liquor company in China includes uh Kweichow Moutai. It’s the Moutai is one of the best known Chinese liquor or baiju brand. The market cap right now is about $350 Billion US dollars and commands a very high P/E ratio, like 49-50x earning very prominent and very respectable company and uh some of it’s bottles cost a lot of money like even 1 brand 5 star brand made in 1955 it cost about $200,000 per bottle. But, on average is lower like $380, $400. A lot of people consume at that price level.
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Another company is Wuliangye, the market cap $118 billion dollars, the P/E is 36.40. the current, I mean 12 month trailing P/E.
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Luzhou another Chinese liquor brand, smaller, market cap about $49 billion dollars but P/E ration is also very high, 46.40.
Slide:
And now we talk about the potential for 5 Grain Empire Spirits. The performance and potential on the side of empire spirits, we will do joint venture with growers in Vietnam to produce 500,000 tons of sorghum per year. That initiative will bring about low end 30 to about 150 million dollars per year. We have already contacted 5 prominent growers in Vietnam like (need help here with these company names at 25 min mark) TanTan kum, like Chung Hai, like Song How, yeah those and also Binh Phuoc province there’s plenty of land suitable for growing sorghum in that area and Empire Spirits will be doing joint venture directly with those local growers to produce the sorghum. And from there we will supply the raw material to 5 grain. And 5 grain from the raw material will supply up to 230,000,000 liters of bulk spirits per year. From that it can produce on the low end like $181 million to high end up to 5-6 years can be $900 million dollars per year.
And then on the 5 grain side the beauty is besides selling bulk spirits to other distillers, we will develop our own brand. Actually the company has already developed its own brand, it’s been tested and very very much well liked and we are ready to go into production once the transaction is concluded. Actually now it’s inked so we can start working on that, we don’t have to wait until September. We can start working that right away especially the Empire Spirit side we can start doing joint venture and grow the product right away and then with the proprietary own brand we can generate 3.6 to 14.5 billion dollars per year over the period of 5-6 years.
And the potential market cap from all this activity will be about 49-56 Billion dollars in the first 2-3 years.
Let me see if we can get the numbers here so we can look at it.
Slide:
We have 3 prongs
We grow our own sorghum but we can supply it to sell to other distillers or we can use it by 5 grain to produce, process, ferment sorghum to turn into the bulk product and sell and supply to other distillers and thirdly we do our own private brand.
Yeah we can do first year probably about 100,000 tons
We use a very low price of about of like $300 per ton but actually right now $380 in that range. And cost per ton probably about 50 to 70 dollars maximum. We wanted to provide cushion for so we say $125 but um, Even that we will on the low end we can also generate about 30 million dollars of revenue and can net about 17.5 million dollars the first year. And the second year it can grow to 75 million to 150 million we keep at that level further years but at the demand grows we can always increase it.
Slide:
And then processing sorghum to supply to other distillers we can do take 100,000 ton it will give about 45 million liters and the price per ton is $1800 per ton. Cost per ton is at $300 but bump it up a little bit to give a cushion. Even at that level the gross revenue will be about $180 million dollars per year. Minus expenses that would be $146 million dollars per year.
And then on the private brand, every 2.2 ton we can get a liter of the liquor and there are about 375 milliliters per bottle and the price per bottle like Moutai out there can be at least 3-400 dollars a bottle but suppose we keep a very low price level, 60-80 dollars per bottle, the cost per bottle about $10. So if we do 50,000 tons per year that would be for us about 60 million bottles and the gross revenue would be about 3.6 billion dollars and net income about 3 billion dollars and of course if the quantity is increased over the year then the numbers will increase accordingly. From 50,000 to 75-100,000 or 150,000 per year and then this is the net income (points to picture 4.5 billion dollars).
When we combine the gross revenues the net income for the 3 components. We have to keep in mind cause see ah,on the empire spirit level because we own 100% of this company on the PHI we can account for all of the revenues and net income. However on the activities that are provided or handled by 5 grain we only own 70% of 5 grain so we can only account for that portion of revenue and profits for that company. So when all combined, the 3 components the gross revenue for the first year will be about 2.7 billion dollars minus expenses net income will be about $2.2 billion.
And that’s based on our cost structure however we want to mirror the proxy performance or parameters that Kweichow Moutai is and has experienced over the years. So, we take that use their average, we get about $1.2 billion net instead of $2.2 billion dollars. And then that is for the first year, but if we take the average..the first 2 year average revenue would be about $3.4 billion dollars and average net income $2.8 billion. And if we use the average 2 year average for Kweichow Moutai then will be about $1.6 billion dollars and well we say that is too high.
We take a 30% discount or haircut so that would give us about $1.1 billion dollars net income per year for the first year, on average for the first 2 year. If we use the P/E ratio that is prevalent right now for Kweichow Moutai is 50x earnings for the last 12 months then market cap would be about $56 billion. Suppose we use the average P/E ratio for the most prominent brands of Chinese ? companies in the liquor industry it is about 44x earnings so the market cap would be about $49 billion dollars.
So that’s why we say based on those parameters we produce the raw materials sorghum plan and provide the product firstly to 5 grain and we can sell to other buyers as well but why would we sell to other buyers because 5 grain can use it and turn into a more valuable product that will command a higher price. The market cap with that kind of preferred potential the market cap would be like $49 to $56 billion dollars in the first 2 or 3 years.
But remember you know these assumptions are based on the current market situation right now. That may change over the year. It’s not going to be the same. But so far the trend, the circular trend has been very very favorable for this company over the years. It’s been very stable and commands very very high mutiples.
Leadership acumen you know and I will give a very quick summary of the PHI.
Our company is committed to create long term sustainable value for our shareholders. We have a very robust strategy and we believe that we have the right components to make it happen.
PHI group invests and participate in select industry and special situations that potentially can raise very significant returns for our shareholders. We provide M and A advisory services to international clients through our wholly own subsidiaries PHILUX capital advisors and we plan to uplist our stock on a major exchange while we continue to further our growth expansion. Right now components which are very important to our success.
PHI Luxembourg bank funds is the first ever Luxembourg bank fund that is organized to focus in investment opportunities in Asia in particular in Vietnam. And then we have the Diamond Exchange, Asia Diamond Exchange. We also participate in cryptocurrency blockchain technology especially with our own carbon mitigation company CO2-1-0 carbon corp.
And we have 5 Grain Treasure Empire Spirits transaction. Vinafilms international. We’ll be able to share that with you I believe hopefully next week or the following week. But it will be very very exciting. And then a new subsidiary we have established is called PHILUX global energy. We will be the holding company for the Kota energy group and Kota construction company that we are acquiring.
And we expect to be able to provide information and update you on this transaction next week. We are able to do that. And then we share with you more information. Right now we will not go into much detail. But these operations and transactions should be expected to be major contributors to the company’s revenue growth and profitability in the near and long term.
So before wrapping up here, I want to thank all of you for taking your time to join us today and some questions that have come up quite often about the buyback and the dividend distribution, uh, dilution. For the buyback program we are not going to be able to share anything at this moment. You know we have until the end of March to manage our buyback program. We do have some contractual covenants that we’ll have to honor in conjunction with the buyback programs so we’ll have to do it accordingly.
But, at the same time there are priorities right now we will need to consider especially with the acquisition opportunities. We have at hand we want to complete these transactions first and then we can go back and buyback the shares at a later time.
The capitalization plan. Some of you are concerned about the newly authorized share, 60 billion. Are we gonna issue all those shares? No, we are not gonna issue all of those shares, but we want to have it as a backup plan because we would need some equity alongside with debt financing to complete some of these transactions. If we can handle all these transactions by debt at the low interest rate, of course we want to do that, but at the same time any debt financing requires certain percentage of equity for lenders to be comfortable with and we’ll have to manage it accordingly.
And some of you sometimes, of course, you know I cannot blame you as you have been me with the company for too long. Sometimes it is very frustrating, you know very disappointing when things do not happen according to schedule and honestly, you know, more than anybody else ( I will stop the sharing so I can-closing screen)…More than anyone else I want to see things happen quickly and I want to deliver the results sooner rather than later. We cannot control everything. We have to work with other people, people on the same continent here in the US but we have cross border partners in other parts of the world like in Asia and South America, South Africa, and Europe and so forth.
So it’s quite challenging. Sometimes I’m a little bit over optimistic. I, when we are talking with our partners It’s ok, we’ll do it next week, next week for sure. And then something happens, you know, something I cannot control. So one particular incident that I say well I better keep my mouth shut, I better not say too much, just wait until things happen and then we will announce and I will try to do that more often going forward. So I’m not gonna say too much ahead of myself.
But anything and everything we do and some will say “you don’t care about shareholders”. I DO CARE about shareholders. And I am one of the longest shareholders in this company. From the beginning. And my job is not done yet until it’s a success for everybody not only myself. So you can sit and count on me that I have total commitment and determination to complete my job. And always for the best interest of all our shareholders, not just one or two.
Now it may be a disappointment for one but it can be disappointment for everyone. But if it’s a success it’s a success for everybody. So please understand, you know I am sometimes some of you try to ask questions, try to get some information ahead of time unfortunately I cannot reply to all those emails or text messages. So please understand and forgive me. Doesn’t mean I don’t care about you. I DO care about each and everyone of you. But, I just cannot answer each and every question and sometime some of you get all excited. I may share something else and you get all excited and you go online and share something else it’s not exactly what I was saying and sometimes I’m very frustrated about that too. So please, please do understand.
Let me go back to the screen here a little bit. I want to say thank you, all of you and for taking your time to be with us today and uh, we will have announcement next week and probably another conference call next week with more details. Today I just wanted to give a wrap up and overview on the 5 grain and vinafilms, I sorry the Empire spirits transaction. I notice some of you have raised your hands unfortunately because was ongoing it’s hard to stop and answer you but if you. I’m sorry I’m not able to answer all of you who have raised your hand in reception. We’ll try to accommodate you next time.
Again, ladies and gentlemen, thank you so much for your time and for your patience. I believe the future is very bright and very exciting. I’m planning to travel to Turkey, to Dubai and also Europe prior to going back to Vietnam after the new years day to get a number of things on the ground because we would like to have the international press conference to announce the diamond exchange with our international partners as soon as the travel situation with omicron improves and allows easier passage and stay without prolonged quarantine. Thank you so much. Stay safe and health and may God Bless you all, all of us. Thank you. Goodbye.
For those of you who have raised your hand, please send me an email with your question and if anything I can answer that is public information I’d be happy to share with you. But, unfortunately I am sorry for not being able to respond directly to you during this call. Thank you very much. Goodbye and God Bless you.
Direct Link to CC: https://www.youtube.com/watch?v=0yLcQuuYCsI
Ladies and gentlemen,
Thank you so much for taking the time to join our shareholder/investor conference with PHI Group today. I noticed some of you came in quite early and thank you for your patience to come in early to reserve a spot and this time we have ah ah plenty of room for everybody so it’s good, nobody will be excluded from the call like sometime in the past we didn’t have enough room and some of you can’t get in and now we don’t have that kind of problem.
I know it’s been quite some time we didn’t have a conference call update/review but um now I think this is a very important juncture. We have a lot of important news that we want to share with our shareholders and also new investors as well. Before doing that I want to thank you again for taking the time to join us today.
Slide:
Part of the presentation as a routine caveat is that you know there are forward looking statement in these presentations that may contain different terms and words like uh “may, plan, well, should, anticipate, etc” that talks about things in future which are subject to uh a lot of risk and uncertainties that could cause future circumstances, events and results to differ materially from those we think will happen that were projected.
So we need to be mindful of that. And um I have repeated myself quite often, you know our stock is a microcap, nanocap stock. Very volatile. Can be very risky. So you know, Some of you say “you don’t have to say that” but I have to because it’s not appropriate, it’s not suitable for everybody and especially those of you who are older, and have accumulated your uh, your cash, your wealth over the years. You don’t want to put all of your eggs in one basket, just in case anything happens, you cannot afford uh that kind of risk and loss.
So please keep that mind. And uh,this stock is not for the feeble hearted. If you cannot uh take the risk please don’t, don’t get involved. Because if you, if you get involved and if something doesn’t work out and then you come back and blame yourself and blame the company and people, your friends and those who recommend to you and I don’t want that to happen to you. And, you can always VOTE with your feet!
If you don’t like it, uh find something else, find another company to invest into, you know because it’s only appropriate for certain people. Of course, there is a lot of potential going forward, but there’s also, also risk and uncertainties. So I want to make sure because I have that fiduciary responsibility um with our shareholders and investors in general.
Excuse me, let me, someone is trying to text me. I have to ahh…Sorry about that. A shareholder is trying to enter the room.
With that being said, um,
Slide:
I want to just go a quick overview of our company. Many of you are long term shareholders, you already know, so we don’t have to go over again. Ahh, but um, some of you are new so you know I will just go over quite quite quickly so um you have a good understanding.
You know, our company has been around since 1982. Stock symbol: PHIL. We have a lot of shares authorized. We are not going to issue any new shares yet. Uhhh, we have total 60 billion shares authorized and 28.7 Billion shares issued and outstanding, and that is of the common stock. The preferred stock we have 600,000 shares issued and outstanding. Those are not convertible to common stock. They just have voting rights but they don’t have conversion rights.
Slide:
Our corporate strategy and scope of business. Our strategy is to build and deploy valuable resources with distinctive competitive advantages. And uh, we participate and compete in businesses that have large, growing market potential and we create long term value by and provide points of exits for investors through either capital appreciation and sale and spin off of our business units.
Right now our scope of business includes Luxembourg bank funds called PHILUX global funds and a number of subfunds to invest in real estate, infrastructure, agriculture, renewable energy, healthcare, etcetera. One of the focus of investment for the Luxembourg funds and for our company is the Asia Diamond Exchange. Yeah we spend probably about 4 years working on that and because of the COVID situation there have been delays but I now expect to get the Visa to return to Vietnam in a couple weeks after the lunar new year day to continue to work on the ground there. But that’s something we will talk about at another time in more detail.
And we have the advisory and consulting services under PHILUX capital advisors. We provide merger and acquisition and consulting services to private and public companies. We took the first Vietnamese company public at NASDAQ after we were very instrumental in that capacity. And right now we have just signed an agreement with CT Farms in Vietnam to take that company public on NASDAQ. I’m so communicated with uh Mr. Robert McCooey the vice chairman of NASDAQ. We come back and meet with him again. We used to work very closely with him and his staff in the past. But now is the about time we can bring some up with him more prominent Vietnamese companies public in the US and list on NASDAQ.
Please excuse me, I need to take some water.
And then ah, you have mergers and acquisitions. We participate in M&A activities as a principal meaning we acquire companies for ourself and we also provide advisory and consulting services to clients for a fee and for equity in those transactions. That’s our model.
And then we also invest into special situations ah like the ah The ah 5 grain/empire spirits transaction is a special situation.
And, we uh also engage in crypto and blockchain technologies especially with the launching of the CO2-1-0 carbon corporation ahh, carbon mitigation token headed by Mr. Choky from Indonesia.
And then um, we also have a few more things but it’s too early so we will share with you later on that.
Slide:
And we have a number of subsidiaries. The more prominent and active right now is the PHILUX Global Funds, Luxembourg Bank Funds, Philux Capital Adivisors M&A consulting and investment advisory services, Asia Diamond Exchange which is the holding company for which the Asia Diamond Exchange is to be established in Vietnam. We will share more with you about that in the next few weeks. There have been a lot of exciting developments and it’s been getting better and better everyday for us. We are so fortunate, so much blessing. We are the ONLY COMPANY in the world that is doing this transaction. And uhh, It’s not by our own intelligence or ahh, because of that we are smart or anything. You know it’s a combination of Grace and hard work and also the goodwill of people all around the world that have come together to make this happen.
And then ah, we have American Pacific Resources that are engaged in mineral and natural resources. We still have the gold mine claims in Oregon and we haven’t been able to develop those yet but we have been in talks with uh, some potential partners in Asia, especially in the Philippines and we will share with you in the coming days. This has still some more work that needs to be done before it makes sense to distribute the dividend shares from this subsidiary to our shareholders.
And then Vinafilms International actually is the new name. It used to be called American Plastics, Pacific Plastics but we just changed that name to Vinafilms International and we expect to share with you a few very good things about it in the coming weeks. If not next week it will be in the coming weeks. Hopefully we can do that next week.
And then Phivitae Healthcare uh, is in the healthcare and medical industry. We are working with a joint venture in Vietnam right now and we will announce when it’s ready.
And then Empire Spirits use to be called Provimex. It was a subsidiary of PHI way way back in 2004 and we established the company as an import export entity. We did some business and um, instead use the company as a holding company for some potential acquisitions. But you know the target companies didn’t work out so we still have that vehicle and uh it’s been seasoned and can be turned into a public company fairly quickly once we bring um I mean The Five Grain under our belt.
And the Carbon CO2-1-0 Carbon Corp is the carbon mitigation carbon credit subsidiary headed by Mr. Choky.
Slide:
Luxembourg Bank funds, is Global funds with a number of compartments for investment into different industries. The are of focus for the funds.
Slide:
Initially we were focused on the real estate aspect because ah you know we work through the funds and also a JV in Vietnam to develop and build out the Asia Diamond Exchange so it will be going through our PHILUX Global Fund Real Estate component.
Slide:
And special situation we mentioned and merger and acquisition. We had some very significant success story in the past. We were instrumental in taking the first Vietnamese company to the NASDAQ stock market, the Cavico Corporation. We spun up a subsidiary of PHI Group with ah, called ATC technology and we completed a merger with a cellular biomedicine group and upgraded to the NASDAQ stock market under the symbol CBMG way way back and the company also went through some changes but it was at one time very prominent and traded like for $40 per share and a lot of our shareholders at that time received a dividend from this spinoff.
We also listed a company, a subsidiary of ours called Philand Ranch, on the Frankfurt Stock exchange. Unfortunately timing wasn’t right, it was uh, as we was launching it and then the global financial crisis happened and then we couldn’t pursue with the development of the 491 project in central Vietnam at that time.
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Now lets talk about the 5 Grain Treasure Spirits. Some of you have already heard about this company. When signed the let of intent we had a brief presentation so some of you are familiar with it. It’s a Baiju distiller with a 100 year history in Jilin Province in China, northern China. It has a excuse me….It has a proprietary spirit production process. It has patented technology to grow red sorghum for baiju manufacturing. The patented grain produces superior yield and quality compared to the regular grain that are grown by the farmers that don’t have expensive technology. It’s a reputable bulk alcohol supplier some of the largest spirit companies in the world, including the Kweichow Maotai which is largest beverage liquor company globally right now.
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The 5 Grains Treasure transaction. We use Empire Spirits, a subsidiary of PHI Group as a holding company ahh, to hold 75% (I believe he meant 70%) equity interest in 5 Grain Treasure Spirit Company. The total purchase price is $100 million to be paid in 3 tranches. The first one is in March, ah March 18th, June 18th and September 18th of this year. According to the agreement the closing dates is scheduled for September 18th 2022. However we can and we plan to close it sooner as soon as we pay off the full purchase price. We will complete a GAAP audit according to the requirement of uh, the PCAOB, public company accounting oversight board registered to practice before the SEC. It just cannot be any auditor but it has to be registered with PCAOB to to do that function.
I’m sorry I need to get….(coughing)
And then we’ll be able to consolidate the financial result of 5 Grain with PHI Group’s financials. Our plan is to transform the post acquisition companies, both 5 Grain and Empire Spirit to something quite spectacular and we’ll list it on a major exchange. And potentially we’ll be able to distribute meaningful dividend to our PHI Group shareholders.
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And our growth strategy for our 5 Grain Empire Spirit is uh, threefold, three prong. We do joint venture with growers to produce 500,000 tons of sorghum per year. And uh, we supply up to 230,000,000 liters of bulk spirit to beverage companies including the top brand in China. And we will develop our own brand and with proprietary manufacturing methods and preferred distribution channels.
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Some of the, let me see top brand liquor company in China includes uh Kweichow Moutai. It’s the Moutai is one of the best known Chinese liquor or baiju brand. The market cap right now is about $350 Billion US dollars and commands a very high P/E ratio, like 49-50x earning very prominent and very respectable company and uh some of it’s bottles cost a lot of money like even 1 brand 5 star brand made in 1955 it cost about $200,000 per bottle. But, on average is lower like $380, $400. A lot of people consume at that price level.
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Another company is Wuliangye, the market cap $118 billion dollars, the P/E is 36.40. the current, I mean 12 month trailing P/E.
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Luzhou another Chinese liquor brand, smaller, market cap about $49 billion dollars but P/E ration is also very high, 46.40.
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And now we talk about the potential for 5 Grain Empire Spirits. The performance and potential on the side of empire spirits, we will do joint venture with growers in Vietnam to produce 500,000 tons of sorghum per year. That initiative will bring about low end 30 to about 150 million dollars per year. We have already contacted 5 prominent growers in Vietnam like (need help here with these company names at 25 min mark) TanTan kum, like Chung Hai, like Song How, yeah those and also Binh Phuoc province there’s plenty of land suitable for growing sorghum in that area and Empire Spirits will be doing joint venture directly with those local growers to produce the sorghum. And from there we will supply the raw material to 5 grain. And 5 grain from the raw material will supply up to 230,000,000 liters of bulk spirits per year. From that it can produce on the low end like $181 million to high end up to 5-6 years can be $900 million dollars per year.
And then on the 5 grain side the beauty is besides selling bulk spirits to other distillers, we will develop our own brand. Actually the company has already developed its own brand, it’s been tested and very very much well liked and we are ready to go into production once the transaction is concluded. Actually now it’s inked so we can start working on that, we don’t have to wait until September. We can start working that right away especially the Empire Spirit side we can start doing joint venture and grow the product right away and then with the proprietary own brand we can generate 3.6 to 14.5 billion dollars per year over the period of 5-6 years.
And the potential market cap from all this activity will be about 49-56 Billion dollars in the first 2-3 years.
Let me see if we can get the numbers here so we can look at it.
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We have 3 prongs
We grow our own sorghum but we can supply it to sell to other distillers or we can use it by 5 grain to produce, process, ferment sorghum to turn into the bulk product and sell and supply to other distillers and thirdly we do our own private brand.
Yeah we can do first year probably about 100,000 tons
We use a very low price of about of like $300 per ton but actually right now $380 in that range. And cost per ton probably about 50 to 70 dollars maximum. We wanted to provide cushion for so we say $125 but um, Even that we will on the low end we can also generate about 30 million dollars of revenue and can net about 17.5 million dollars the first year. And the second year it can grow to 75 million to 150 million we keep at that level further years but at the demand grows we can always increase it.
Slide:
And then processing sorghum to supply to other distillers we can do take 100,000 ton it will give about 45 million liters and the price per ton is $1800 per ton. Cost per ton is at $300 but bump it up a little bit to give a cushion. Even at that level the gross revenue will be about $180 million dollars per year. Minus expenses that would be $146 million dollars per year.
And then on the private brand, every 2.2 ton we can get a liter of the liquor and there are about 375 milliliters per bottle and the price per bottle like Moutai out there can be at least 3-400 dollars a bottle but suppose we keep a very low price level, 60-80 dollars per bottle, the cost per bottle about $10. So if we do 50,000 tons per year that would be for us about 60 million bottles and the gross revenue would be about 3.6 billion dollars and net income about 3 billion dollars and of course if the quantity is increased over the year then the numbers will increase accordingly. From 50,000 to 75-100,000 or 150,000 per year and then this is the net income (points to picture 4.5 billion dollars).
When we combine the gross revenues the net income for the 3 components. We have to keep in mind cause see ah,on the empire spirit level because we own 100% of this company on the PHI we can account for all of the revenues and net income. However on the activities that are provided or handled by 5 grain we only own 70% of 5 grain so we can only account for that portion of revenue and profits for that company. So when all combined, the 3 components the gross revenue for the first year will be about 2.7 billion dollars minus expenses net income will be about $2.2 billion.
And that’s based on our cost structure however we want to mirror the proxy performance or parameters that Kweichow Moutai is and has experienced over the years. So, we take that use their average, we get about $1.2 billion net instead of $2.2 billion dollars. And then that is for the first year, but if we take the average..the first 2 year average revenue would be about $3.4 billion dollars and average net income $2.8 billion. And if we use the average 2 year average for Kweichow Moutai then will be about $1.6 billion dollars and well we say that is too high.
We take a 30% discount or haircut so that would give us about $1.1 billion dollars net income per year for the first year, on average for the first 2 year. If we use the P/E ratio that is prevalent right now for Kweichow Moutai is 50x earnings for the last 12 months then market cap would be about $56 billion. Suppose we use the average P/E ratio for the most prominent brands of Chinese ? companies in the liquor industry it is about 44x earnings so the market cap would be about $49 billion dollars.
So that’s why we say based on those parameters we produce the raw materials sorghum plan and provide the product firstly to 5 grain and we can sell to other buyers as well but why would we sell to other buyers because 5 grain can use it and turn into a more valuable product that will command a higher price. The market cap with that kind of preferred potential the market cap would be like $49 to $56 billion dollars in the first 2 or 3 years.
But remember you know these assumptions are based on the current market situation right now. That may change over the year. It’s not going to be the same. But so far the trend, the circular trend has been very very favorable for this company over the years. It’s been very stable and commands very very high mutiples.
Leadership acumen you know and I will give a very quick summary of the PHI.
Our company is committed to create long term sustainable value for our shareholders. We have a very robust strategy and we believe that we have the right components to make it happen.
PHI group invests and participate in select industry and special situations that potentially can raise very significant returns for our shareholders. We provide M and A advisory services to international clients through our wholly own subsidiaries PHILUX capital advisors and we plan to uplist our stock on a major exchange while we continue to further our growth expansion. Right now components which are very important to our success.
PHI Luxembourg bank funds is the first ever Luxembourg bank fund that is organized to focus in investment opportunities in Asia in particular in Vietnam. And then we have the Diamond Exchange, Asia Diamond Exchange. We also participate in cryptocurrency blockchain technology especially with our own carbon mitigation company CO2-1-0 carbon corp.
And we have 5 Grain Treasure Empire Spirits transaction. Vinafilms international. We’ll be able to share that with you I believe hopefully next week or the following week. But it will be very very exciting. And then a new subsidiary we have established is called PHILUX global energy. We will be the holding company for the Kota energy group and Kota construction company that we are acquiring.
And we expect to be able to provide information and update you on this transaction next week. We are able to do that. And then we share with you more information. Right now we will not go into much detail. But these operations and transactions should be expected to be major contributors to the company’s revenue growth and profitability in the near and long term.
So before wrapping up here, I want to thank all of you for taking your time to join us today and some questions that have come up quite often about the buyback and the dividend distribution, uh, dilution. For the buyback program we are not going to be able to share anything at this moment. You know we have until the end of March to manage our buyback program. We do have some contractual covenants that we’ll have to honor in conjunction with the buyback programs so we’ll have to do it accordingly.
But, at the same time there are priorities right now we will need to consider especially with the acquisition opportunities. We have at hand we want to complete these transactions first and then we can go back and buyback the shares at a later time.
The capitalization plan. Some of you are concerned about the newly authorized share, 60 billion. Are we gonna issue all those shares? No, we are not gonna issue all of those shares, but we want to have it as a backup plan because we would need some equity alongside with debt financing to complete some of these transactions. If we can handle all these transactions by debt at the low interest rate, of course we want to do that, but at the same time any debt financing requires certain percentage of equity for lenders to be comfortable with and we’ll have to manage it accordingly.
And some of you sometimes, of course, you know I cannot blame you as you have been me with the company for too long. Sometimes it is very frustrating, you know very disappointing when things do not happen according to schedule and honestly, you know, more than anybody else ( I will stop the sharing so I can-closing screen)…More than anyone else I want to see things happen quickly and I want to deliver the results sooner rather than later. We cannot control everything. We have to work with other people, people on the same continent here in the US but we have cross border partners in other parts of the world like in Asia and South America, South Africa, and Europe and so forth.
So it’s quite challenging. Sometimes I’m a little bit over optimistic. I, when we are talking with our partners It’s ok, we’ll do it next week, next week for sure. And then something happens, you know, something I cannot control. So one particular incident that I say well I better keep my mouth shut, I better not say too much, just wait until things happen and then we will announce and I will try to do that more often going forward. So I’m not gonna say too much ahead of myself.
But anything and everything we do and some will say “you don’t care about shareholders”. I DO CARE about shareholders. And I am one of the longest shareholders in this company. From the beginning. And my job is not done yet until it’s a success for everybody not only myself. So you can sit and count on me that I have total commitment and determination to complete my job. And always for the best interest of all our shareholders, not just one or two.
Now it may be a disappointment for one but it can be disappointment for everyone. But if it’s a success it’s a success for everybody. So please understand, you know I am sometimes some of you try to ask questions, try to get some information ahead of time unfortunately I cannot reply to all those emails or text messages. So please understand and forgive me. Doesn’t mean I don’t care about you. I DO care about each and everyone of you. But, I just cannot answer each and every question and sometime some of you get all excited. I may share something else and you get all excited and you go online and share something else it’s not exactly what I was saying and sometimes I’m very frustrated about that too. So please, please do understand.
Let me go back to the screen here a little bit. I want to say thank you, all of you and for taking your time to be with us today and uh, we will have announcement next week and probably another conference call next week with more details. Today I just wanted to give a wrap up and overview on the 5 grain and vinafilms, I sorry the Empire spirits transaction. I notice some of you have raised your hands unfortunately because was ongoing it’s hard to stop and answer you but if you. I’m sorry I’m not able to answer all of you who have raised your hand in reception. We’ll try to accommodate you next time.
Again, ladies and gentlemen, thank you so much for your time and for your patience. I believe the future is very bright and very exciting. I’m planning to travel to Turkey, to Dubai and also Europe prior to going back to Vietnam after the new years day to get a number of things on the ground because we would like to have the international press conference to announce the diamond exchange with our international partners as soon as the travel situation with omicron improves and allows easier passage and stay without prolonged quarantine. Thank you so much. Stay safe and health and may God Bless you all, all of us. Thank you. Goodbye.
For those of you who have raised your hand, please send me an email with your question and if anything I can answer that is public information I’d be happy to share with you. But, unfortunately I am sorry for not being able to respond directly to you during this call. Thank you very much. Goodbye and God Bless you.
Direct Link to CC: https://www.youtube.com/watch?v=0yLcQuuYCsI
