SIAF first makes money by selling APT modules to a JV partnership, plus construction fees, plus consulting, until the farm is operational. They get $3.5M per farm in revenues and $2.5M in gross profits, before fish sales begin. So, if they complete 4 farms in 2011, that's $14 revenues, $10M gross profit.
Part of their contracts call for an equity interest in the JV partnership, so that they participate in those revenues also. In the case of the demonstration farm, SIAF starts with a 20% equity interest, with options to 75% within one or two years of either starting or mature fish sales. Annual sales of 500 tons produces $13.5M in revenues, so starting at $2.75M for a 20% stake rising to about $10M for the 75% stake.
The beauty of this model is two-fold. First, SIAF gets paid high margins to start the business, with no capital required. Second, it is HIGHLY scalable. Let's look at the trajectory of revenues from the fish business over 4 years. This is just how I see it:
Very roughly:
2010 build 1; 0 w/ sales,
2011 build 4; 1 w/ sales w/20% equity.
2012 build 8; 4 w/ sales w/20% equity; 1 w/ sales w/60% equity +/-
2013 build 12; 8 w/ sales w/20% equity; 5 w/ sales w/60% equity +/-
2014 build 12; 12 w/ sales w/20% equity; 8 w/sales w/60% equity +/-
So, revenues project:
2010 $3.5M build + 0 sales = $ 3.5M
2011 $14M build + $2.5 "20%" sales = $ 16.5M
2012 $28M build + $10M "20%" sales + $8M "60%" sales = $ 46.0M
2013 $42M build + $20M "20%" sales + $40M "60%" sales = $102.0M
2014 $42M build + $30M "20%" sales + $114M "60%"sales = $186.0M
Once this scale is demonstrated -- and I'd think 2012 guidance after 2011 sales would do the trick -- coinciding with a major exchange listing, gotta think we get a proper p/e multiple.
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