20 in 2 years?
A "simple" matter of business operational execution and raising investor awareness and perception -- of getting $1.00 to $1.20 in 2012 earnings, a 3 - 4 fold increase, and a trailing p/e multiple of 16.6 to 20, also a 3 - 4 fold increase. "Reducing" 2013 guidance to 50% growth, this equates to a forward p/e of 11 to 13.
Indeed, it's a rare company that can quadruple earnings in two years, yet here we have one that targets that exceptional growth; has met most every target in the last two years; has publicized how it will get there; the plans are well underway; and has maintained or exceeded that trajectory so far.
The flower business is the major incremental earnings growth provider for 2010 and 2011. Production will more than triple 2009 levels, mostly because the crops sown years ago are reaching maturity now and in 2011. SIAF will spread at least $12M in 2010 harvested profits into 2010 and first half 2011, as they see fit. Likewise 2011 harvest -- which will be larger -- into 2011 and 2012. $12M is $.20 fully diluted share, exactly the delta between $.29 2010 guidance and $.49 2011 guidance.
On top of this, SIAF targets "franchising" and constructing 4 fisheries in 2011 and 8 in 2012. That's $10M and $20M incremental gross profit in respective years, not counting income from fish sales, which will lag by about a year. So, in 2012, SIAF will derive income from its interest in 5 farms; in 2013 from 13!
Of course the dairy business is still the largest segment and is also growing; the retail brand is getting off the ground; and the cattle business capital is shared with the government, and set to contribute far more meaningful earnings perhaps second half 2011.
Obviously, the balance sheet will look great as a portion of income drops to cash.
On top yet again, distribution and marketing branches will commence 2011, as well. Will look to next year for more guidance on earnings power there. So, if as in the past, SIAF meets goals, really not too hard to see 3 - 4 fold income growth in two years.
A concurrent similar exponential increase in p/e multiple is both easy and hard to visualize. For a small pink sheet company, SIAF has done a remarkably good job promoting investor awareness. They have consistent, fairly frequent good pr; they adopted a very well conceived dividend policy; they have retail and institutional IR contacts; they have ample market makers; they maintain pretty darn good trading volumes and liquidity.
However, they are held back by being on the pink sheets and by being grouped with the Chinese microcaps, some of which have shoddy accounting or worse. If this company executes 100% growth for two years; appears on a 30% - 50% growth pattern for another 3, clearly in the right space in the right country; and if -- the biggest if -- they were listed on the Shanghai exchange or major NASDAQ, even a p/e of 30+ would be possible. Would constitute a PEG of only .5 to 1.
The Form 10 will probably take months to evaluate. I'm not sure where SIAF will uplist, but I think what's absolutely critical is an articulated path for a second uplisting as soon as possible to a more well regarded exchange. A dual listing would be good as well. Likewise, rock solid, Big Four accounting firm, starting hopefully in 2011, consistent conference calls, and analyst coverage
