ARB-ArborGen Holdings Ltd

[TheHunter]

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.

If you cannot answer these questions you have not read up enough on the company.

See my earlier posts in this thread:

- Growth is to be generated by gross margin expansion by converting OP to MCP
- In my personal opinion, MCP margins are under appreciated by the market
- To address your questions specifically and simply; they sell seedlings
- The cycle to produce seedlings are aprox. three to four years
- ARB expanded nurseries back in 2018 and 2019 and invested in MCP production, unsurprisingly, in 2023 and 2024 ARB expects a significant uptake in MCP volumes

Significant profit growth in 2021 and 2022 was never going to happen. This should not be a surprise. It is all about MCP volumes.

[TheHunter]

Remember ArboGen's business model is based on proprietary genetics and R&D. They have acquired nurseries, developed their MCP genetics and are now converting supply to MCP. OP has never been the main strategy to grow earnings; MCP has 6-8x higher gross margin on an absolute basis and indeed, 2023 is the major inflection point for MCP supply as shown below. An additional ~100m MCP seedlings at these margins creates significant earnings growth.

In my opinion, this potential growth is not fully understood by the market and I suspect this third party buyer has figured this out.

Attachment 12693

From July 21; "2023 is the major inflection point for MCP supply".

[LoungeLizzard]

If you cannot answer these questions you have not read up enough on the company.

See my earlier posts in this thread:

- Growth is to be generated by gross margin expansion by converting OP to MCP
- In my personal opinion, MCP margins are under appreciated by the market
- To address your questions specifically and simply; they sell seedlings
- The cycle to produce seedlings are aprox. three to four years
- ARB expanded nurseries back in 2018 and 2019 and invested in MCP production, unsurprisingly, in 2023 and 2024 ARB expects a significant uptake in MCP volumes

Significant profit growth in 2021 and 2022 was never going to happen. This should not be a surprise. It is all about MCP volumes.

I've read quite a bit on the company, thanks for asking. They sell seedlings? WHo'd have thought.

Seriously, I think a lot of investors wish ARB all the best in executing their vision - I invested in them partly because I believe in the end product of more trees, partly because I saw real potential, but I'm also wary of their ability to execute their plans. Having said that I'm happy to be proved wrong.
You will be aware of their rather patchy management record and a tendency to not meet guidance, as per last year. Let's see if MCB seedlings do turn out to be the silver bullet.

[TheHunter]

I've read quite a bit on the company, thanks for asking. They sell seedlings? WHo'd have thought.

Seriously, I think a lot of investors wish ARB all the best in executing their vision - I invested in them partly because I believe in the end product of more trees, partly because I saw real potential, but I'm also wary of their ability to execute their plans. Having said that I'm happy to be proved wrong.
You will be aware of their rather patchy management record and a tendency to not meet guidance, as per last year. Let's see if MCB seedlings do turn out to be the silver bullet.

It appears some thought MCP vol was a jack and bean stalk situation, rather than a multi year process

I completely agree regarding mgmt., and have expressed this on the thread a few times. There is definitely negative sentiment attached to ARB and its price, and for good reason. That said, one can argue this is discounted in the price already, which may become an opportunity if they can finally deliver.

I have some comfort on delivering given 85% of available MCP seedlings effectively already sold out (per recent announcement). That said, there is still various supply side risks (weather events, SC issues, inflation, economic growth, etc.), and do agree mgmt. could do more to cut costs and optimize ARB as a standalone company.

To flog a broken record to death, the strategy is all on MCP vol from 2023 onwards. The misses to date sure are disappointing. However, in my opinion to focus on these and to ignore the future MCP volume is misunderstanding the whole strategy and the business itself.

I will happily hold my hand up in a couple of years time and say I was wrong if this all goes to s*** but I (somehow) have some faith in this time being different. The risk reward skew if you run the numbers is attractive to me.

(And of course; DYOR).

[Maxtrade]

It appears some thought MCP vol was a jack and bean stalk situation, rather than a multi year process

I completely agree regarding mgmt., and have expressed this on the thread a few times. There is definitely negative sentiment attached to ARB and its price, and for good reason. That said, one can argue this is discounted in the price already, which may become an opportunity if they can finally deliver.

I have some comfort on delivering given 85% of available MCP seedlings effectively already sold out (per recent announcement). That said, there is still various supply side risks (weather events, SC issues, inflation, economic growth, etc.), and do agree mgmt. could do more to cut costs and optimize ARB as a standalone company.

To flog a broken record to death, the strategy is all on MCP vol from 2023 onwards. The misses to date sure are disappointing. However, in my opinion to focus on these and to ignore the future MCP volume is misunderstanding the whole strategy and the business itself.

I will happily hold my hand up in a couple of years time and say I was wrong if this all goes to s*** but I (somehow) have some faith in this time being different. The risk reward skew if you run the numbers is attractive to me.

(And of course; DYOR).

You are exactly on the button Hunter. Nice clear assessment for any newbie investors entertaining adding ARB to their portfolio. A very good entry opportunity at current SP levels, 2023 isn't too far off. So this buying entry timing couldn't be a better opportunity really for this yet to hold ARB or looking to top up.

Disc, holding and adding.

[Thistle72]

Arborgen's annual meeting is August 24th. This is the one opportunity shareholders have to ask questions of management each year. What are the issues that are top of mind for this board?

Personally, I am focused on management's statement that they are pursuing a "value maximization strategy". Hard to believe that is the case when the shares have been flat for a decade at least.

We should organize some hard-hitting questions that demand thoughtful answers to hold management and the board of directors to account. Otherwise, Arborgen will labor in obscurity for another 12 months.

[Sideshow Bob]

https://www.nzx.com/announcements/403186

The Board of ArborGen Holdings Limited (NZX: ARB) is pleased to present the Interim Report for the six months ended 30 September 2022. All dollar values are in US currency unless otherwise stated.
Highlights for the Six Months to 30 September 2022:
- Harvested highest ever MCP cones in bushels in the US in November 2022, estimated to produce seed equivalent to over 200 million MCP seedling equivalents
- Very strong FY23 sales and margin growth in Brazil where ArborGen is the only company providing superior, proprietary genetics to pine and eucalyptus growers
- Execution of seedling supply agreements in the US with two well-funded, experienced companies with programmes to afforest (plant new forests) on pasture land or farmland designed to sequester carbon to help address global warming
- Expansion of ArborGen’s in-house container capacity across two existing owned sites underway, increasing ArborGen’s US in-house container seedling production from 12 to 20 million containerised seedlings per annum
- Acquisition of a 10 million capacity pine nursery located in Canoinhas, Santa Catarina, Brazil now complete
- New long term lease agreement commencing on 1 December 2022 for a nursery located in Martinho Campos, Minas Gerais, increasing ArborGen’s internal eucalyptus production capacity in Brazil to nearly 50 million seedlings per year
- Evaluation of additional opportunities for expansion in Brazil
Please see the attached pdf for the full report.

[Balance]

The losses continue.

[iceman]

The losses continue.

A very sad story of "what should have been"

[Balance]

A very sad story of "what should have been"

The saga of what happened with Fletcher Challenge Group - one disaster after another.