Replies to post #113295 on Sino Agro Food Inc (fka SIAF)

[The Swede]

The growth are exceptional and Triway should therefor get an exceptional valuation. If you look further in to the future in that calculation, you will see that the PE decrease to a PE that is more "normal", but the value of Triway continues to increase, so giving Triway a high PE in the earlier years is not wrong.

Anyway, the production figures are made up by me, so take it for what it is. My point this time was the one time EPS gain SIAF will make when SIAF get listed in Hong Kong.

[RealDutch]

The big question relates to the Graham formula, which implies a p/e ratio of about 60 next year for instance.

Actually much higher. If the average annual growth rate = 66%
Then P/E multiple = 8.5 + 2xG = 8.5 + 2x66 = 140.5

A lot of people argue the formula is too aggressive. But it isn't assuming (1) you get the growth rate right and (2) you use a term of 7-10 years. Perhaps you could use 2G for a 10-year term, 1.5G for a 7-year term, and 1G for a 5-year term.

The problem is, getting the growth rate right. Because what usually happens is, growth slows down unexpectedly after a few years. But not with SIAF, right. We already have the land. We have the technology. We have the edge. And we have a plan. We just need financing to get this thing going.

Look at it this way. Let's assume a company will grow 100% every year for the next 7 years. Then Graham tells us the P/E should be 8.5 + 2G = 208.5. After the first year, P/E will drop to 104. After the 2nd year it will drop to 52. Because it's growing 100% every year. So after only 2 years it's already becoming cheap, with 5 years of 100% growth left.