nz farming systems Uruguay

[etrader]

quote:Originally posted by living2

What I can't figger
So they are going to do a NZ type dairy conversion in uruguay.BUT in NZ there is other infrastrucure in place outside the farm gate .
What infrastructure is in place in Uruguay???
Who and how are they going to sell the milk????

There are large farming co ops that process, pgg also own the largest grain producer there. From memory they have forward sold a lot of production and it's on par with Fonterra Kg solids here.

[etrader]

quote:Originally posted by D_Pick

Thanks biker
So no market prices inbetween?

No market prices inbetween, there will be some private transfers through the lead broker only between private sales. So will not know more till end of the year.

the updated site has reasonable info on it for interests sake.

[Winston001]

I'll have to agree with Duncan. Farming is one business which is not easily corporatised. It does happen successfully here and there around the world, but as a general rule, farming is a 24/7/365 day job. It requires absolute commitment from the farmer and this only happens when he owns his land.

Managers can be loyal and committed but ultimately their incentive just isn't the same. Plus corporate ownership imposes an inevitable extra administration tier on the business. Small syndicate farming businesses avoid this but large companies inevitably require bureaucracy - reporting standards etc.

None of this means the Uruguay investment is a bad idea - it may work very well - for a few years anyway. Personally I'm happy to watch.

[Dubdee]

Absolutely agree with Winston. Where is Tasman Agriculture now? Farm prices reflect the lifestyle (life sentence) benefits of the farmers which cannot be accessed by corporations. Still they remain cash flow poor with returns only being saved by the greater fool theory of gain through on sale

[etrader]

quote:Originally posted by D_Pick

Thanks biker
So no market prices inbetween?

Hi to the few of you out there who've bought into nzfsu, i know it's not a widly sought share as it was minimum $20k to buy into but a few updates.

nzfsu have purchased another 6000 hec approx since the inital float taking their holding to over 12000 hec now.

Land prices are continuing to climb due to the other uses that corn farmers are producing for bio fuel and soy crops in south america.

There have been recent trades in the partly paid stock at .56c so a 12% premium to original cost.

With the US dollar high it's been effective to take the IPO deposits over to purchase and as the exchange rate drops over time it increases the underlying value in the land also.

Dairy prices have also climbed around the world giving their future earnings a better financial model.

Updates can be seen on their website www.nzfsu.co.nz

This update is simply to give a few views on this stock, it's not for all investors as it does have risk and the financial dividends will be some years away, it's just simply my view on this company.

[Snoopy]

quote:Originally posted by etrader



Hi to the few of you out there who've bought into nzfsu, i know it's not a widly sought share as it was minimum $20k to buy into but a few updates.

nzfsu have purchased another 6000 hec approx since the inital float taking their holding to over 12000 hec now.

Land prices are continuing to climb due to the other uses that corn farmers are producing for bio fuel and soy crops in south america.

There have been recent trades in the partly paid stock at .56c so a 12% premium to original cost.

With the US dollar high it's been effective to take the IPO deposits over to purchase and as the exchange rate drops over time it increases the underlying value in the land also.

Dairy prices have also climbed around the world giving their future earnings a better financial model.

Updates can be seen on their website www.nzfsu.co.nz

This update is simply to give a few views on this stock, it's not for all investors as it does have risk and the financial dividends will be some years away, it's just simply my view on this company.

Thanks for the update etrader. Do you have a reference on that 56c partly paid share transaction? I would be interested to know if there is any volume involved. I couldn't see anything on the NZFSU website.

There is still the 50c second installment due on 14th December 2007. Does that mean the NZFSU share price has really only risen 6%, being 6c on '50c + 50c'?

The dairy price payout rise in NZ will be good for those farmers who have invested in NZFSU. Falls in commodity prices might have led to forced sales of NZFSU partly paid shares, as farmers struggled to meet their second payment. Of course I am assuming that it is primarily dairy farmers that have invested in NZFSU. If the principal investors are sheep farmers then we might still get some bargains!

Whether the dairy commodity price rises are good for NZFSU is open to debate. Price rises are good for any existing farm assets. But if the price rises have pushed up the price of land in Uruguay significantly it could mean we shareholders get less land for our buck - not so good.

There is some personnel risk too, for those who can't stand the pain of living in a different culture. Didn't one of their NZ recruited managers quit? Still overall I think it is a good business to be in. I intend to hold onto my shares for a while.

SNOOPY

discl: hold NZFSU

[etrader]

Snoop

*The .56c was traded through abn amro craigs who were the lead broker they told me when i bought in that it would be rare to have transactions in this stock before they list so i have no idea of volume sorry, i look at the fact that it's 12% up on a partly paid share, so it's up for debate if they would sell for $1.12 when fully paid up.

*You're right that farming values rising would give less land for your buck, what we need to look at is nzfsu is paying $3k per hec which is proabably 10% of the price of nz farms "don't quote me exactly". Remember that nzfsu already owned 6k hec before the ipo and have still been purchasing farms at very good hec prices. If we say a 10% rise in farm values per hec on 12k hec that's $3.6 mill without thinking in increase, so if they keep buying and you dollar cost average over the entire hec by the current market price of land i'm sure their ave in is still good.

The float happened before the latest surge in dairy payouts so even if they'd stayed flat i'm sure the mostly farming investors who bought in could have easily come up with the second installment. You'd be crazy to commit to an investment where 9 months out you had no way of paying up your shares.

You're right that one of the farm managers quit, he already owned a farm in nz and moved back to run that again, I know he made some inroads in his short employment.

The latest video on their site is a good update.

Hope that helps.

[etrader]

NZFSU have today announced an upgrade in land holdings previous they owned around 12000 hct today they've announced a total land holding after recent purchases of just over 26500 hctr, this has still been purchased around the $2000 per h mark making a $53 million land value pre IPO. IPO is still heading for a mid Dec listing and a possible further capital raising for expansion could follow shortly.

[gisborne_gold]

NEWS RELEASE
8.00AM 12 NOVEMBER 2007

NZ Farming Systems Uruguay - Institutional placement and non-renounceable rights issue to shareholders

NZ Farming Systems Uruguay announced today that it will seek to raise a minimum of $50 million of new equity capital to expand its operations in Uruguay. The company is planning an institutional placement and considering making a non-renounceable rights offer to its shareholders.

The shares will be issued at $1.50, which is a substantial premium to the $1.00 per share pricing of the company’s Initial Public Offer, which closed oversubscribed in December 2006.

The decision to raise additional capital follows a year in which the company has acquired 30,980 hectares of farms and farmland in Uruguay and has made significant progress in its development into New Zealand style intensive dairying. The capital raising will allow the company to expand its land holdings and farming operations, yielding administrative and operational economies that will benefit shareholders, and will deepen the company’s
share register.

Asked to comment on the $1.50 price at which shares will be issued, Keith Smith, the Chairman of NZ Farming Systems Uruguay, said;

“The price for the institutional placement was set on the basis of a Discounted Cash Flow analysis of the company’s forecast revenues, discounted for country risk, and allowing for the placement occurring prior to listing. It was confirmed at the end of an investor roadshow to Uruguay last week, when more than 70 existing and potential shareholders and institutions visited the company’s farms and met with Uruguayan bankers and lawyers and the directors of the company.

“The Board is considering making the same offer to existing shareholders shares at the $1.50 price, in the form of a non-renounceable rights issue in the ratio of one share for every two held. The Board considered this was the most appropriate way to give shareholders who wish to increase their participation in the company the opportunity to do so.

“$1.50 represents a significant uplift in value compared to the $1.00 per share the original shareholders subscribed in December 2006. It reflects the inherent value at that time, the progress the company has made in acquiring and developing land over the past year and the potential for a sustained increase in milk prices at levels above those prevailing last year.”

Mr Smith said the institutional placement and any non-renounceable rights issue were expected to raise a minimum of $50 million, but oversubscriptions may be accepted by the company. NZ Farming Systems Uruguay will be writing to its shareholders with more information later this week.

PGG Wrightson has a 10.57% shareholding in NZ Farming Systems Uruguay and manages the company under contract.

[gisborne_gold]

Last week's announcement suggests that the $1 shares issued last year, partly paid to 50c, are now valued at $1.50 ahead of next month's listing.