Sino Agro Food Inc (fka SIAF)

[slyestjester]

The example you give (100 mil shares, 100 mil earn.) is good for illustrative purposes but does not correspond to the SIAF case. You are suggesting issuing stock at 50% of what earnings would otherwise be, which in the SIAF case would be at .31. Clearly Solomon is not doing that nor would he do that as it would be highly dilutive initially. He is issuing stock at 1x earnings. In that case all you need is a 100% return on investment to avoid dilution. If you go to the SIAF balance sheet and compute return on non-land, non-loan assets, you will see that the return on those assets approximates 100%. That's what I think of as marginal investment (i.e., non-land investment). Even if the return is slightly less than 100%, in the second year you are getting the same rate of return on a compounded quantity which is eps accretive without doubt, and in the third year it is even further compounded and even more accretive. So without doubt SIAF is now benefiting on an eps basis from the sale of financing shares last year and would be even had they been done at the prices that S issued them at this year. Even in the case you suggest where dilution is 50%, while I would not suggest it in practice, it could theoretically work out to investors' advantage over a 5-yr period depending on return on capital, if the funds were committed for that full period.