My general impression from the trip is that the company is executing very well on a five year plan to integrate wholesale with distribution and retail. It's perhaps 70% of the way there in terms of the time it takes to create and integrate all three, and to achieve $500M NTA +/-.
Generally speaking, the operations were impressive in scope, as befits the projected revenue numbers. All are growing works in progress, producing either construction or sales revenues or both, and all with ongoing expansion, or expension probabilities.
I came away very impressed with management, starting at the top. Solomon is incredibly hard working, energetic, positive, and friendly to shareholders, in the context of rapidly building a fast growing, sustainable, important company. Likewise, the company has some likely helpful, influential shareholders.
As discussed, what's new now are several real possibilities, including listing on the Swedish OTC equivalent as a first easy stepping stone, rather than AMEX or Nasdaq, and issuing a bond offering with one and two year warrant options above market price. Both are aimed at expediting realizing Solomon's visions, and limiting both future dilution and overhang. I'd think that both of these options create vulnerability for sellers, as the train leaving the station now has more and earlier catalysts.
The company has legal constraints on what it can and can't publicize. But announcing the new independent Board members should provide the first step. Expect this in September.
The distribution center build out will be 2,000 s.m., triple the originally announced size. The fish portion is scheduled to be complete at the end of this month. It already has a freezer with a capacity of 100 tons of fish, currently stocked with 20 tons. The cattle portion should complete by the end of the year. They will build a restaurant on the second floor, where buyers can sample goods for purchase. Would not be surprised to see $10M+ revenues from this outlet in Q4. This is the start of the second leg in the wholesale/distribution/retail food chain chain. The ROI on this leg is huge, and would serve well, imo, as a clearly articulated example of investment well spent.
The third leg will take many forms over time. One form is restaurants, which have three separate possibilities: the Leonie's restaurants (already started, and both company owned and franchised restaurants in the north and separately in the south. The Xining cattle farm projects 850M RMB revenues in 2015, not counting their plans to start 150 restaurants, 50 company owned. Of major note: without expected inflation for beef, this sub headed for Dragon Head and spin out status, expects to sell head of cattle for 22,000 RMB each wholesale, but 46,000 RMB each to its restaurants.
There are two other retail modes being considered, like restaurants, with required investment in mind. These are small retail "health food" outlets, and one large 10,000 - 15,000 s.m. marketplace (3x - 4x the size of the average Whole Foods store) that will house company branded stores and others in a mix of old and new China selling mode, though all certified organic. Expect the smaller option starting this year. It wouldn't surprise me if the second option is tied to any bond offering.
