Replies to post #29194 on Sino Agro Food Inc (fka SIAF)

[slyestjester]

The point is the funds generated from the sale of financing shares are not being used to purchase land or make loans. They are invested in projects with staggering immediate returns, and that's why it's possible for Solomon to perform this financial wizardry. Were it not for the overhead of saleable shares, he could do this for a very long time, until the rate of return on his projects began to decline into a moral range.

[viking86]

The PE of 0.50 was chosen more for illustrative purposes to better get a point across. The lower the PE is from 1, the more unrealistic it is to expect it to be accretive. Reality is last year many share issuances were done at pps b/w 0.50 and 0.60 or a PE b/w 0.71 and 0.86 based on generally expected 2012 earnings of 70c. That would require the project those marginal funds were deployed in to generate in the first year a ROI of 116 to 140%! Impossible, as these projects take at least 1 year to complete construction (zero return in that first year) and a full 3-4 years to ramp production to full capacity. So what ROI can be expected in those 3-4 years? That would probably be acceptable if the marginal financing is limited to 10-12% of the total capex as per original plan. But in the mean time the dilution has reached more dramatic proportions (about 17% dollarwise and 50% sharewise), begging the question whether it is justifiable from a monetary point of view.The extra growth generated by marginal capex sure helps increase total earnings to some extent but it's hard to find any justification as for them to be "accretive". Impossible in light of the above discussion. The 30m+ shares issued will also dilute earnings in ALL future years by a whopping 30%+, good or bad years.

[snow]

sly

"That's what I think of as marginal investment". I disagree strongly on what is marginal investment. Marginal investment refers to the last dollars invested in my view. In this case the dollars raised by selling shares at a low p/e ratio is what is of interest.

[treit2002]

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%

Viking has it right. But you claim anyone can have their view of what any term means, I guess. Obviously a spurious concept; perhaps synthetic, if you like.

Nonetheless. okay, let's see how this would work, even your way. Please show how SIAF has 100%+ return on assets less land and loans. I see $217M in assets, of which $55M is land. Loans are minimal.