Replies to post #6339 on Sino Agro Food Inc (fka SIAF)

[treit2002]

More on the retail franchise concept:

The business plan is designed to set up a virtuous circle. As I understand it, which is deduced:

SIAF JVs wholesale businesses, in which they use profits or other capital to invest in increasing equity. Therefore, the % of revenues flowing to SIAF net income increases each year.

SIAF establishes a wholly owned distribution network selling to retail franchisees.

So,

The wholesale businesses have a guaranteed customer, the distribution network.

The distribution network resells the wholesale product to the parent company's retail franchisees, who have a guaranteed supplier.

What does this do?

First, it doubles the revenue for the wholesale product, tacking on distribution profits for SIAF.

Next, it makes new wholesale JV businesses much more attractive to JV partners, because they have a guaranteed customer.

Therefore, the pace of new wholesale JVs can be expected to accelerate. In turn, expanded wholesale business capacity increases the supply of wholesale food available to the franchise network. Therefore, that network can grow, creating a larger customer base for more wholesale farms or cattle ranches.

Curious about others thoughts on this.

[viking86]

thanks, Treit, for the great DD as usual. I was actually looking for some simple numbers to answer my simple question.

Net income must come in at 0.45 x 63.5m= $28.6m in order to produce an eps of 0.45 for 2011 if the share count stays at about 63.5m (?) for the year. Seems unattainable to me b/c that requires an adj. net margin of 49% on a revenue of 58m. The net margin for 2010 was 21% I believe. No way it would go to 49% even without the diary business.

I donot want to come across as a basher ( I am long like you although it's a small position) but it looks to me Solomon is full of dreams and "when & if" 's and all his expectations would require a perfect execution from all sides, even by Mother Nature, to come close to fruition.

C'mmon, you reported 3m rev from continuing businesses in Q1 and guide for 58m for the year? Do they have a money printer?