SML - Synlait Milk Ltd

[NZSilver]

Ruth Richardson looks like she was in parliament before I was even at school. What's the story?

[NZSilver]

Can someone please explain the difference between synlait milk and synlait ltd. I find it all a bit confusing even after looking at the diagram in the prospectus. Thanks

[FarmerHamilton]

Can someone please explain the difference between synlait milk and synlait ltd. I find it all a bit confusing even after looking at the diagram in the prospectus. Thanks

Synlait Ltd is the 49% shareholder of Synlait Milk. These shares are the only asset SL holds & are are now being given to the individual shareholders of SL and then SL will be closed down. So all current shareholders in SL will become shareholders in SM and will have the option to sell into the IPO or keep their shares. Post the IPO they will be limited to selling $300,000 worth until approx Sept'14 using the IPO price as the reference.

Discl. I am receiving just under 300,000 shares in SML from the above transactions.

[Xerof]

Thanks for your disclosure FH, it is an appropriate action to take when contributing to discussion threads, especially when a Company IPO's

Lease, have you any interest to disclose I wonder? Could you also explain where endless growth is to come from? Do you think they will open more plants next to Fonterra around the country?

Sparky, hard to say what discount to apply for the control situation, could be historically as much as 30%, if viewed the other way ( what might someone have to pay for control)

[1leon]

Sparky, hard to say what discount to apply for the control situation, could be historically as much as 30%, if viewed the other way ( what might someone have to pay for control)

The question of someone having to pay for control is not an issue now--Bright already has control and keeps it with a minority holding whilst the new shareholders are asked to put up all the funds to take the Company into blue sky growth.

[Xerof]

Thats why I said...if viewed the other way

I won't speak for Sparky, but in my experience, where there is an open share register, there is usually a bit of a premium built in for takeover potential in the market price. As you correctly observe, in this case there should not be, and hence Sparky's original mulling of this very point

[FarmerHamilton]

I know the management team well, having four Bright nominees to the board ( incl 1 resident NZer ) is not going to be an issue. They are highly skilled, ambitious, and diplomatic ... Bright must be delighted with their $82m investment, I think the strings they pull are very very loose if that makes sense.

[bull....]

I see ruth richardson is on the board..... anyway heres some comparison

china mengniu dairy - pe 30 , eps .71
Bright Dairy - pe 48.7 , eps .29
Fonterra - pe 24 , eps .29
synliat - pe 28.1 , eps .07

all quick calcs im still doing my research esp on their margins

[Lease]

Lease, have you any interest to disclose I wonder? Could you also explain where endless growth is to come from? Do you think they will open more plants next to Fonterra around the country?

Except I have applied IPO, I have nothing else to disclose. The endless growth I reckon is from demand for NZ dairy products from global market, especially from Asia. Having Bright as a single largest shareholder is a big plus for Synlait Milk as I see so many many Chinese like NZ infant formulas, maybe just only China market will keep Synlait Milk work 24 hours a day, 7 days a week. Haha.

[FarmerHamilton]

They look like they have doubled the P&L this year from last. The new infant formula plant must be cranking as I think that is a good way ahead of the 2013 budget. I also reckon they were long WMP in a rising market compared to Fonterra and have also out hedged them ... 1c on the FX makes a big difference. All in all looks like they have had a great year and there milk supply won't have been affected as badly as the drought affected Fonterra regions as Synlait are probably almost 100% supplied from irrigated farms in Canterbury.