Replies to post #24953 on Sino Agro Food Inc (fka SIAF)

[Andrew26]

Just by the fact that they dilute 10 % total capex for 25 % diluting the company must almost surely mean that its DILUTIVE and nothing else. You would have to make 250 % profit of the extra money from dilution, and in ONE year timeframe to be even on it. And thats total BS just by itself.

[slyestjester]

Ecuador--There are other considerations as well.

If earnings per share increase absolutely as a result of new operations, even with some dilution, then eps will rise more quickly than otherwise. This is important as there is a time value to money. Viking shed light on this in his last post.

There is no reason why there needs to be 100% ROE in the first year or even the second. If SIAF gets that return at some point after initiation and then forever, one might argue that is satisfactory.

Being first to market plays a part. If SIAF does not act quickly, clearly opportunities will be foreclosed. That is, as a result of this consideration, an operation could be dilutive in the short term but anti-dilutive in the long term given the fast-shifting business terrain.

A project in itself might be dilutive but it might enhance other operations. For instance, fish farms and cattle farms enhance the opportunities and ROE of wholesale and restaurants.

When Solomon has reduced his shares, this has served as a counter-weight to any dilution.

Hence it's much more complex than the way you are presenting it.

[viking86]

Beware that the share financing covers only Siaf's stake in each JV. So max 25% in the first year, not 100% as implied in your ROE calc. Part of their 25% cost of building the project is also paid to Siaf itself as the service provider. Say if PF2 costs 10 m design and engineering payable to CA, Siaf gets paid 7.5m upfront by the partner and "pays" itself (CA) the other 2.5m , ie. with zero cost out of pocket. Anyway what's the ROE on that 10m portion? It costs them almost nothing and gets 7m instant profit. So I would be very careful with any hasty financial conclusion based on simplistic or wrong assumptions. Fact is they have built 5 FF , 4 CF and other things with almost zero out of pocket cash over the last 2-3 years by making the JV partners pay for almost every thing.

[treit2002]

Ecuador.

I completely agree. That's why I said marginal issuance should be toned down.

I do not buy that Solomon does not know what you are saying. He has made commitments to growth that have come due. Fair enough. But I fully think that 2013 issuance eliminated, if other alternatives are available, or limited by curtailing some capital development if the alternatives are not available.

He should have had some ability to moderate growth in a year or two time frame, if market conditions turned dilutive, which they have for over a year now.

There's nothing magic to me about the $500M NTA number. I'd much prefer a $400M NTA company with 100M shares outstanding.