Yep, all the factors that were against attempted IPO back in 2011 have certainly turned....
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[QUOTE=TheHunter;
I see it as good timing for a US listing.[/QUOTE]
Dow Jones Industrial Average closes above 35,000 for the first time.....timing lookin good!
N Z 0.315 or equivalent USD 0.22 roughly for the whole can of worms is looking darn cheap for major in it's field, in comparison
to what US Share prices look like .. ;)
Perhaps ARB should list on one of the US exchanges or float off some of it's American operations
upstairs instead.. ;)
It's no wonder there are vultures sniffing around after a good meal, at ARB stakeholder's expense .. ;)
I’m new to the board but have been following Arborgen for a while. Like others, a patient investor who sees value here.
Has anyone tried to forecast a future share price based on the hints we have been getting from management? Valuation upside lies in ARB’s ability to continue “stepping-up” customers to the higher value seedlings, sold at much higher prices and significantly higher margin. (see June 2018 presentation) Lots of assumptions to make on volumes, but the trajectory is clear.
Ultimately, ARB is a biotech company and not just a grower of nursery stock. To unlock the value in the platform, the company has to pursue a US listing and market itself strongly on this basis. Biotech is very hot in the US right now, particularly genetics companies with R&D to transform industries. ARB has this. In the US, the sector trades at an average of 14x EV/EBITDA multiple. ARB’s current valuation is less than 10x. We are just at the start of the inflection to higher margin sales that will drive EBITDA far higher.
ARB should also focus new R&D spend on carbon-sequestering tree species. Imagine tweaking the genetics of commercial forests so they sequester 2x, 5x, 10x the carbon. As the price of carbon offsets goes up, “carbon capture seedlings” could be hugely profitable. ARB also falls in the category of ESG investments. Very popular among institutional investors trying to prove green bonafides.
Bottom line, ARB remains undervalued and off the radar. I will continue to hold and will vote my shares against any takeout that does not reflect the hidden value here. We need a US listing to bring volume to the shares and broader institutional interest.
Someone on the shareholder's conference call raised the complaint about Directors' fees, which are as much as $150k NZD in the case of PR Smart, and totaled 1.1% of ARB revenue. I have similar concerns. There's no question the Directors are highly qualified and should be compensated fairly, but is this level of world-class expertise really required for a company as small as Arborgen? Product demand is not an issue, only the supply of seedlings is. So simple execution in the nurseries should keep things on track and not require a brain trust to achieve.
To address shareholder concern, the company should explain specifically what the Directors are working on and how they are contributing to the bottom line. If a strategic re-think is underway that is changing the company trajectory meaningfully, we should know about it.
I do congratulate Mr Knott Jr on taking just a $1 Director fee. His interests are properly aligned with shareholders.
Welcome Thistle :)
Nice post, and again I 100% agree - upside opportunity definitely exists if MCP supply increases are delivered, even before applying US / growth multiples.
I have modeled potential EBITDA based on the available information - this is why in some of my earlier posts I was very pleased that they final disclosed MCP seedling margin vs. OP as this allowed for margins to finally be back solved and then applied to the provided supply forecasts.
I like what I see.
https://www.edisongroup.com/publicat...of-risk/29647/
Good analysis. On all metrics - production, margins, EBITDA, EPS and hopefully SP - Arborgen look to be on a cusp of a breakthrough year. Might not be flying under the radar for too much longer....
"General disclaimer and copyright
This report has been commissioned by ArborGen Holdings and prepared and issued by Edison, in consideration of a fee payable by ArborGen Holdings. .........
........Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified."
I can't remember ever reading a report by Edison where the company in question wasn't on the cusp of greatness...
Fair point, particularly that this report was complied at Arborgen's request. But the projections on earnings growth do mirror my own analysis. I see that KPMG have also been hired to do a strategic review. Let's see what they have to say.
Edison had a $0.74 valuation on ARB a few years ago
'Allbirds is set to follow Rocket Lab and become the second company founded by a Kiwi to line up a multi-billion Nasdaq listing this year.'......surely the timing must be right for ARB?
It has been 3 months since Arborgen announced a strategic review triggered by a conditional offer to buy the company. I wish shareholders like myself had pushed harder during the annual meeting for some clarity on when this review will be complete, and how long the company has to provide a definitive response to the offer if they haven't already made one.
For the benefit of long suffering shareholders, the strategic review should include an update of slides 15-21 from the ArborGen Opportunity presentation from June 2018. That will give us some confidence that the proposed buyout did in fact "materially undervalue" the company.
Details of the US listing opportunity should be provided too.
almost hopefully coming up 3 months of accelerated growth .. and SP is retreating ..
I dont get it .. Is the Mic upstairs from the Northern hemisphere not working now
or is everyone upstairs busy outside putting out bush fires ? ;)
Yeah maybe a bit of a buying opportunity to increase portfolio sub 0.30. Before next push up higher with the next update?
ARB maybe just isn't on too many investors radar at the moment, and in turn the slow tyre leak recently. Likely will see a bounce and resume northwards rally soon. Possibly Instos are tapering the SP down then ready to buy in large volumes pre next update.
I took the opportunity to top up more. Will do so again before SP pushes back up to mid 0.3's
Thoughts?
Agreed. Normal for the SP of under-the-rader stocks like ARB to stall in the absence of news. But if you buy in to their potential growth trajectory, as I do, then things will kick up again with the next update. News of the strategic review would help - particularly if there is more details on a potential US listing or buy-out.
Yeah would definitely want to have your portfolio topped up by then or would miss out on the next 20% jump that we will inevitably see. Or much more like PEB's recent growth, especially if there is a US listing or takeover in the works. Surprised we aren't seeing those in the know securing more shares already. No doubt will follow when talk of update arrises and mainstream catches wind.
I bought another 50k at 27.5c as I feel there's more chance of good news coming, either by way of the strategic review or in day-to-day financials. I still feel that ARB is a case of the right business at the right time, given the greening of the economy, projected housing boom and shortage of timber products. It's been a long time since they announced the strategic review - don't know what to make of that. Either they are seriously considering options and a big announcement could be forthcoming or there's simply nothing to report. SP does need some shoring up by way of an update though.
Yeah, I think investors have been right to approach ARB with certain degree of caution and skepticism given the machinations the
past. "Chequered history" I believe is the phrase.;)
I got in less than a year ago at 15c as I felt they were on track to becoming profitable, which they subsequently did. Still feel they are
undervalued given their market share and potential. Next couple of years will tell the tale if the potential substantial increase in margins from MCP seedlings is realised. Happy to hold and accumulate further when there are dips such as now.
Seems like a bit of an over reaction for a 10% drop in SP? Based on a 7% seedling loss. Positive news indicated still in the works for the US, that's where the more definitive progress and gains will be realised.
Will top up some more taking advantage of this big momentary drop in SP today.
Was this update announced previously that it would be released today?
https://www.nzx.com/announcements/381738
and the sad story continues....not a mention of sale/IPO/etc???
I don't think this really changes anything, other than perhaps testing shareholders patience. Not much they can do about weather systems, supply chain problems and inflationary pressures, other than pass on costs next season. I agree though that they should have at least give an update about what is happening with the strategic review - is it still happening, are they assessing options or what?
Finally something to report.....https://www.nzx.com/announcements/381921
If the 15% of the company with a flat sales forecast is worth $22.25m, then the remaining 85% with a healthy growth outlook must be worth much more than the $127.5m implied equivalent. Shares remain undervalued.
This also clears the way for a switch to a US listing.
That's what I was thinking - this may be preparing the ground for an eventual US listing. Personally I wouldn't like to see yet another NZ company de-list from NZX and NZ investors miss out on what I feel is a good growth path for ARB. Anybody - XER0 investors perhaps - know the mechanics of that process and whether local investors get shut out?
If all the assets were the same, yes, $150m would be about right for the total company value ($127.5m for 85% remaining + $22.5m cash).
But if you believe the press release, the business they are holding on to has much higher growth potential and should therefore be worth more. Presumably the cash will be put to work in building capacity to further expand. Maybe they can even build a nursery somewhere that is not in hurricane alley. :ohmy:
Grant Samuel's valuation of the Arborgen ANZ business is worth reading: http://nzx-prod-s7fsd7f98s.s3-websit...921/358173.pdf
One part of the "Future Opportunities" section caught my eye:
By selling ArborGen ANZ first this simplifies the ArborGen business. ArborGen will then be focussed on two countries, the US and Brazil. The Proposed Transaction would also likely reduce regulatory approvals required for a potential future transaction. In particular, by selling ArborGen ANZ first this may remove the requirement to obtain OIO approval in New Zealand if a sale of the remaining businesses were to occur.
Does the sale of the ANZ business make a sale of the whole company more likely? And does it have anything to do with the conditional offer received in June? The valuation report also reveals that the bidder is foreign (page 5), so prior to this sale, OIO approval would have been required for the deal to go through. Inquiring minds and shareholders would like to know!
I am not in favor of a sale and believe the greatest shareholder value will be realized with a US listing.
Tend to agree with your comment that best option for shareholder would be US listing. It seems we are being left in the dark somewhat as to which is more likely, sale or potential US listing?
That said with either scenario any reason why SP seems to be struggling a bit to push up past 0.30 currently. Seems to be a bit of a bottleneck there. Wonder if those sellers don't think either of these scenarios are on the cards, because if they did wouldn't it make more sense to at least adjust their sell orders up closer towards 0.35.
In the absence of news from ARB itself, the SP will stall or slip backwards. It's all a bit guesswork as to what the strategic direction of the company is at present and the market doesn't like uncertainty. I myself think there's more recommendations from the strategic review than what ARB have divulged so far. Happy to wait and see but holding off buying more.
At the risk of beating a dead horse, I've been thinking about why ArborGen would sell its ANZ business. There has never been any discussion about divesting it in the past, and even though the prospects were low growth, it was a profitable subsidiary with genetic IP in radiata pine that might have been saleable elsewhere in the world. ARB was not at risk of violating debt covenants, or overly leveraged. There has been no apparent scramble to raise cash either. So why sell it? Only two reasons I can identify:
* To eliminate the need for OIO review if the company is bought by a foreign entity
* To refocus operations on growth markets in Brazil and the US in advance of a US listing
Either way, a catalyst for value realization seems at hand.
For anyone who thinks a US listing doesn't necessarily guarantee a re-rating, consider the EV company Rivian that just listed at an $80 billion valuation with exactly $0 in revenues. The US market is extremely frothy, and paying up for any asset with a hint of green. Great time for ArborGen to list.
Yesterday's announcement that the sale transactions have been satisfied looks interesting not speculating possible futures ! and the sale is now unconditional completion on the 30th !!
Yes, one step at a time and the 30th is another step, or, we’ve had the hop, now the step, next comes the jump.
You were saying you regretted selling out 60% recently. Wouldn't the volume sitting at 0.27 currently be sufficient to buy back in whatever amount you sold. Or was it an amount larger than that. Could top up at least taking advantage of the shares available at that price currently. That is of course if you are expecting the sale and potential course US listing to give the next run up on SP?
No Maxtrade is the answer ,this was still is a multibagger for me ,and funds now invested elsewhere now which coincidently was not a good move but in the future should be .
You are correct though with this potential us listing it could go big time and probably will & 27 cents would be a bargain now if only !!
I'm with Thistle and Hunter and reckon there's plenty of upside compared to downside from here, especially when you model out the effects of increasing MCP supply that's now coming into inventory. The intentions of the ANZ sale seems like a clear focus on the USA and a listing there to me, which is a nice bonus.
It's a bit messy but I've put my thesis into a write up which may be of interest for those hopeful ARB followers: https://fundamentalgoob.com/2021/11/...rgen-holdings/
I've now joined those hopeful holders but always happy to hear why I might be wrong.
Yes thanks also goob. I am even more gutted now :(
Great job Goob - you've modeled the MCP inflection really nicely and my back of the envelope calculations are similar.
I think of the ArborGen business as sort of like a software subscription. If ArborGen's seedlings have better growth traits than the competition (all signs seem to indicate they do), then it has a captive base of forestry customers who will continue to upgrade their seedling purchases as the company ramps its technology. The marginal additional cost of growing an MCP, Varietal or Transgenic seedling is small, so what we should see is margins meaningfully increase even if the number of seedlings sold is flat, as you have projected. R&D needs to continue to make sure the value-add is there.
I also see upside in ARB's "Advanced Genetics Platform" that can be applied to more forestry products in future. The sale of carbon credits from forestry holdings is a new revenue source for landowners, and they are incentivized to plant tree species that will grow fast and capture the most carbon. Too early to model this into financial projections, but it's out there as a growth opportunity.
The risks are real. ArborGen has been a perennial disappointer in one way or another, and governance remains a concern. I would be very disappointed if ARB were sold out from under us, which is a possibility given that the majority of shares are in the hands of a investors (Knott and Libra) who may have limits on their patience.
Thanks for the detailed post Goob. Spot on. Either way looking like substantial returns on the upside higher than current SP 0.27.
Solid half year guidance report. Confirming direction and where things are headed. Surprised to see that relatively large seller sitting there hasn't removed or upped their sale price to mid 0.3's at least with this outlook. Guess they must need their funds. Seems to be creating a mental block there currently holding the SP back from leaving the station for a rally north. I would say it's fair to say as soon as that seller clears out the way SP will follow a steady uptrend to follow. Then likely see several 20% spikes with any further updates with US progress (similar to what PEB has experienced and shown over last 12months).
Definitely want to be holding should any US listing subsequently be announced. If not holding prior will miss an easy 20% plus bounce there.
Thanks guys for your input and info.
Hey Goob, nice summary and thanks for sharing. Completely agree with the overall premise and direction and very happy to see someone else modelling MCP numbers as well.
However, I don't think your modelling is quite right; between 2024 and 2026 we see an increase of MCP from 50% to 70% of total volume, yet you are also showing a decreasing GM %. When MCP margins are ~8x higher than OP, GM % should be trending materially up, reflecting the much more favorable product mix which is the core premise of the ARB growth story.
Your mistake is taking the MCP margin assumption @ 7-9x OP and applying this to prices, instead of margin. You've also used a 15% CAGR for COGS which again, does not reflect the proper margin assumption.
Not to worry tho, you'll be even more impressed with the numbers once you re-calculate based on MCP margins.
All the best.
Very disappointing the half-year results do not include any update on the strategic review. Shareholders deserve at least some idea of when this will be complete. What is taking so long?
Thanks for that feedback Hunter. Take the 15% CAGR growth in cost of sales with a grain of salt, I had only really done that because of my natural skepiticism. We know that given the difference in margin, cost of sales will only really increase slightly no matter the product mix. But if I applied only incremental increases in cost of sales (which btw I think is realistic) combined with the full movement to 70% MCP product mix the gross profit really starts to blow out ($approaching $60m in 2026). If I reduce down my R&D assumption as well, EBITDA is looking like $36m in the US business by 2026, which given the past performance I can't confidently say is likely considering it's currently $6m. Adding margins of safety, maybe it's a downfall that I'm too conservative. Time will tell.
I know my approach with selling price isn't perfect but it's where I could get the numbers and it matches relatively well. Haven't had the chance to look over the recent result just yet.
I would be interested to hear where you see gross profits increasing to over the next five years?
My main concerns for all of this are actually getting customers to move to MCP which looks somewhat difficult (i.e. ANZ in 2020 only sold 50% of seeds MCP) and getting customers to move to MCP at today's prices in the future. But they are pretty confident about their MCP market share in the US so potentially they do have lots of pricing power.
Share price a bit soft at the moment with plenty on offer. Wouldn’t surprise me if Hugh Fletcher is selling down now that he is involved with the purchase of the Australasian division.
May be a weak share price for a while.
I found the opposite - I could only find the numbers and back solve at a GM level. If you do it via price you have to make some big assumptions which can drive some big fluctuations as you've seen by adjusting the CAGR rate you've used.
I've PM'd you and look forward to discussing the numbers :)
Could some kind person walk me through the process of delisting a NZ company and migrating to another sharemarket. What are the implications for shareholders?
I held NZ listed company Cavotec,now code CCC.ST,who moved their listing to Stockholm.
I could follow the share price using Yahoo.
As they were originally a Christurch company Mooring Systems, The Chairman used to come to ChCh and give a yearly update.
They put in place a facility with Link Market Services where you could sell your shares.I seem to remember receiving a divie via Link,in NZ dollars..
With US regulations ARB may not be able to arrange this service.
Perhaps ARB will arrange something with the likes of Jardens or Craigs.?
Very Interesting that Percy thanks .Would it be in their Interest to have a low share price for when the delisting happens !!
Wonder what happened to Richina shareholders when they delisted. Presume they never heard anything more.
Xero is a good example of a NZ company that migrated its listing location, in that case from the NZX to the ASX.
Also, ARB could shift its primary listing to the USA and retain a secondary listing on the NZX.
I've been looking at the listing requirements in the US, and it appears that Arborgen is eligible to list on the Nasdaq Global or Nasdaq Capital markets and also the NYSE American exchange. Since this wouldn't be an IPO or a Direct Listing, it may have to list as an American Depository Receipt (ADR), a certificate that represents the foreign listing in New Zealand. The details are complicated but hopefully Arborgen's strategic review committee has been looking into it and received some good advice.
Others may not know that Arborgen actually already has a security traded in the US OTC market under the ticker RUBNF. https://seekingalpha.com/symbol/RUBNF This is commonly called a "pink sheet" security that is traded between brokers but not listed on any exchange. OTC names are usually thinly traded and RUBNF is no exception: only ~ 6,000 shares have traded since the end of September.
The SP has been slowly leaking. Any thoughts on where the support buyers will decide it's time to kick in and take advantage of the recent reduced share price. Getting pretty low, but still a couple of relatively larger scale sell orders 0.25 and 0.27 that they haven't been able to clear out the way yet. Very low volumes so no real selling pressure on ARB other than a couple of sellers wanting to move their shares through but no real active buyers to move those out the way currently yet.
20% reduction from recent highs always quite a key level for those wanting to top up or take advantage of the dip buying in. Obviously the timing of the negative Omicron PR probably putting a damper on it. But as that simmers a rally up could be on the cards with all other factors with ARB US etc behind the scenes
Looks like a trough at around the 24-25c level. It's very tempting to buy at those levels, even though I hold a reasonable amount already. The lower volumes tends to put downward pressure on the SP and sellers outweigh buyers by 3:1 at the moment. We are well below the highs of a few months ago but this plateau is still 5c up on where the stock was only 6 months ago. Fundamentally nothing has changed - the reasons for buying in 6 months ago still hold. I'd only sell if I had to as I think it will kick up again once the strategic direction of the company becomes clear.
The selling pressure is curious. Volume is relatively light, but someone is motivated to sell and keeps hitting the bid.
The conspiracy theorist in me fears the price is being driven down on purpose so that when the buyout announcement comes, it can be at a premium to last trade. That would get the deal done but still undervalues the shares relative to what we all believe is the potential. Hope I'm wrong.
Go to www.hotcopper.com.au PTG thread and read Madamswer post ;Post #57998396 2/12/2021
Point taken, and I largely agree. It is foolish to speculate too wildly on light volume, small dollar movements. My frustration that we have not heard any result from the Strategic Review (5 months now) got the better of me.
Though the June 29 Strategic Review announcement implies that the acquisition proposal was rejected, it is not stated explicitly. Does anyone recall Arborgen mgmt actually saying "we rejected the bid"?
Interesting to look back on this analysis done by Sandell Asset Management in 2011, when they owned 14.4% of Rubicon.
https://www.10xebitda.com/wp-content...n-Oct-2011.pdf
At that time, they outlined a strategy to boost the share price (then $0.40 NZD) by either putting the entire company on the block, or selling the controlling interest in Tenon and then listing ArborGen on Nasdaq. Their “normalized valuation” forecast for ArborGen was $500m USD. :rolleyes:
10 long years later, Sandell has lost its patience (sold out in 2017), and we are still waiting to find out if a US-listing is a remotely feasible outcome.
They have been talking allot more about carbon capture lately. Apparently their trees capture allot more carbon.
With all the green money from Companies and Governments, this could be a real game changer.
Seems like something is going to happen in near future..Without NZ operations, no point being based in NZ.
If those last 2 sticky sell bids were to be removed, only the 1 seller at 0.255 and the other at 0.27, then looks like building support could lead to a pretty swift rally pushing back up to where it was previously maintaining above 0.315. Until we then get further updates to push SP to next level.
Deleted post
Great news. ARB pointing towards reaching its potential at last. A slow burner but anticipating the share price catching fire at some stage down the track.
MKTUPDTE: ARB: ArborGen Holdings Updates Market
29 December 2021
ArborGen Holdings Limited (NZX: ARB) (the Company or ArborGen) announced
today that following completion of the sale of ArborGen's New Zealand and
Australian businesses for NZ$22.25 million (the ANZ Transaction), it has
repaid the US$2.88 million of sub-ordinated debt raised in 2019 from certain
directors / major shareholders and senior management needed to fund the
US$14.4 million acquisition of ArborGen's headquarters in Ridgeville, South
Carolina. The Company has also reduced its Synovus working capital facility
by US$5.5 million, which combined with the sub-ordinated debt repayment, will
result in annual cash interest cost savings of approximatively US$0.4
million.
The Company also announced that its business in Brazil (ArborGen do Brazil)
has executed an agreement to acquire an 8-10 million capacity pine nursery
located in Canoinhas, Santa Catarina, Brazil. The acquisition cost is
estimated at BR$5 million (US$0.7 million) including certain capital
expenditure items.
ArborGen's CEO, Andrew Baum, said "Increasing domestic and export demand, new
pulp mills and strong charcoal markets resulting from increasing iron ore
demand, are collectively driving strong demand for eucalyptus and softwood in
Brazil. ArborGen has grown to become one of the largest commercial suppliers
of eucalyptus and loblolly pine seedlings in the Brazilian market,
replicating its US strategy to convert the market to products with superior
genetics in Brazil."
"We are projecting Brazil's earnings to more than double next fiscal year
(fiscal year ending March 2023) driven primarily by stronger pricing for both
our eucalyptus and pine seedlings, and increased sales. The acquisition of
the Canoinhas nursery will further accelerate this earnings growth and
strengthen ArborGen's position as the leading supplier of pine genetics in
Brazil."
Still another year before things start to turn. Just depends when you want to get in. Share price will slip back pretty quick to 25cents
[QUOTE=LoungeLizzard;934100]Agreed. ARB is still under the radar but the stars seem to be aligning in its favour. It's only a matter of time before the ratings agencies pick up on it and the SP rockets.[/QUOTE]
As it has been for the last 10 or so years !!
Quite strange this One the sp has been up & down so erratically big swings, since the expected sell off went through .
The opposite of what I expected this wont last .
Downgrade.
https://announcements.nzx.com/detail/386255
A very frustrating company!!!! :confused:
I suppose Omicron will have thrown a few spanners in the works but nevertheless it's hard to figure this one out. They've reported previously that 90% of seedlings were pre-sold and given that they will sell 30% more of higher margin MCP seeds this year, then why the downgrade? ARB have a dominant position in a growth industry during a time of timber shortages, climate awareness and housing boom. Yet they don't seem to be able to turn much - if any - of a profit. What gives?
Yup. I got out a while ago, unfortunately at a lower price than where it is today.
I attended the AGM in Christchurch about 5? years ago.
I reported on the then Rubicon thread what was asked as questions from the floor and the responses.
The 3 main points were:
1. Name change from Rubicon.
2. Dividends start in 2-3 years.
3. Listing on the US market was the appropriate way forward.
Advance 5 years and only one (the easiest) accomplished.
As 'percy' often says, he wants companies to do what they say they are going to do!!
Just bad luck ……some companies aren’t lucky to start with.
Cross pollination going well apparently
I still think the underlying opportunity driven by MCP remains... but man does mgmt. need to change. Even the mgmt. profile on the website looks like its straight out of an 90's college year book.
https://businessdesk.co.nz/nzx-announcements/386967 j p Morgan look to be moving in on forestry. share price moving accordingly ,happen something bigger brewing.:t_up:
https://businessdesk.co.nz/article/a...takeover-offer maybe these chaps ( j p ) where the third party and instead bought elsewhere in forestry https://realassets.ipe.com/news/jp-m...053562.article
Worldwide dynamics of dwindling supply vs growing demand will soon take over as the world and NZ is coming out of Pandemic parameters. Very little volume moving with ARB shares has lead to trickle down of SP. As Ukraine fear stabilises and markets resume stability ARB SP placed for a solid bounce. With SP so low the % gains will be substantial. Will soon be viewed as a great entry point level for those that have been sitting on the sideline. Also carbon credit farming will reduce supply further, all parameters set for ARB to become more 'valuable'.
Disc holding/ adding
Pleasing results and record US advanced genetics seedling sales as ArborGen focuses on higher growth markets following sale of its New Zealand and Australian businesses (ANZ business) during FY22
- Despite the ongoing impact of the pandemic on overall sales volumes, sales of advanced genetics seedlings increased 32% year-over-year
- Operating earnings (before other significant items) of $2.7 million for continuing operations in US and Brazil, up from $1.0 million in FY21
- Revenues from continuing operations of $47.6 million, up from $42.8 million in FY21
- Gross margin from continuing operations of $17.8 million, up from $15.6 million in FY21
- Adjusted US-GAAP EBITDA result of $10.1 million excluding the ANZ business sold and other significant items, up from $7.4 million in FY21
- Completion of sale of ANZ business for NZ$22.25 million (ANZ Transaction), significantly strengthening ArborGen’s balance sheet
- Net debt reduced substantially to $11.5 million, from $27.4 million in the prior period
- Repayment of $2.9 million of sub-ordinated debt raised in 2019 to fund the $14.4 million acquisition of ArborGen’s headquarters in Ridgeville, South Carolina, and reduction in ArborGen’s Synovus working capital facility by $5.5 million, collectively resulting in annual cash interest cost savings
- $4.7 million of deferred tax recognition including $3.8 million of previously unrecognised tax losses available
- Completion of acquisition of an 8-10 million capacity pine nursery located in Canoinhas, Santa Catarina, Brazil for approximately BR$4 million (US$0.7 million)
- Materially improved performance projected in Brazil in FY23 (fiscal year ending March 2023) driven by stronger pricing for both eucalyptus and pine seedlings and increased sales volumes
On the surface it looks like a good result in difficult circumstances but Net Profit is down 46.9% to only US$1.7m. They really need to increase the higher margin MCP seedling sales because that's nowhere near enough of a return considering ARB market position.
Agree, and were it not for the tax benefit, ARB would have seen a sizeable net loss! One-time write offs are killing profitability.
I am frustrated we have still not seen a report from the strategic review, which appears to have cost some part of $1.8m. If the conditional acquisition proposal received June 2021 was rejected, we should know why, and if the reasons were financial or otherwise.
ArborGen Concludes Strategic Review - NZX, New Zealand’s Exchange
ArborGen Holdings Limited (NZX: ARB) (the “Company” or “ArborGen”) announces today that as a result of the strategic review conducted over the last year, the Board of ArborGen has refocussed the business on its core traditional and emerging high growth markets in the US South and Brazil, as well as on new and emerging high growth carbon markets. In line with this refocused strategy, ArborGen sold its more mature Australia and New Zealand business on 30 November 2021 for NZ$22.25 million, substantially strengthening its balance sheet, and affording it greater opportunities to invest in targeted growth arenas. Accordingly, the Company advises that the strategic review commenced on 30 June 2021 has now been concluded.
Should start seeing more demand for this stock. ARB is quite under the radar and not on many retail investors portfolio so very low volumes of late. Probably won't take too much for a couple of solid bids to quite quickly push the share price back up to where it was previously sitting.
Well, let's hope so.
I thought the strategic review was a bit of a damp squib - simply re-iterating growth prospects that they have been talking about for years. Why is a business with the market share of ARB, only making 1.7m in profit (down 47% on the previous year). How the hell can that be with all the things in their favour - housing boom, carbon trading, vastly superior product. I'd have hoped the review would have been looking at trying to understand why ARB makes such an appalling low return on capital. Then to look at ways of improving it - cutting overheads, pricing etc. Why would anyone run a business like ARB with all the risks involved for only $1.7m profit? And how do they hope to give shareholders a return on their investment off such a low base, even after all this time. I'm starting to think that ARB shouldn't be a public company as it doesn't seem to operate one in its regard to shareholders. Perhaps courting a takeover or even de-listing would be the best course of action.