SML - Synlait Milk Ltd

[1leon]

I don't follow FH logic that an improved milk price is good for Synlait Milk float. It should be good for (Unlisted) Synlait Farms Ltd. but the reality here has also been that Synlait Farms on Unlisted has been a total failure in terms of improving liquidity--3 transactions at 35% discount and now only one very small bidder at 40% discount to asset backing.And that was the position even before a float of Milk was raised. The 3 substantial private holders of Milk and Farms haven't then achieved any access to funds which it seems Milk needs and which has been a continuing difficulty for Milk.I would have thought a full float of Farms might have more appeal to the market than Milk remove the current discount Farms is suffering and give the principal shareholders some breathing space.

[FarmerHamilton]

I don't follow FH logic that an improved milk price is good for Synlait Milk float. It should be good for (Unlisted) Synlait Farms Ltd. but the reality here has also been that Synlait Farms on Unlisted has been a total failure in terms of improving liquidity--3 transactions at 35% discount and now only one very small bidder at 40% discount to asset backing.And that was the position even before a float of Milk was raised. The 3 substantial private holders of Milk and Farms haven't then achieved any access to funds which it seems Milk needs and which has been a continuing difficulty for Milk.I would have thought a full float of Farms might have more appeal to the market than Milk remove the current discount Farms is suffering and give the principal shareholders some breathing space.

I didn't say that a high payout was good for Synlait Milk ... I do think this years profit will be very good however based on the current Fonterra payout. I reckon Synlait have probably outsold them and outhedged them so look for some big numbers in the prospectus for 12/13.
Agreed SNLF Unlisted experience is nothing to write home about but at least over 100k share have traded but it is disappointing that the day after a Fonterra announcement of a $7 payout for next season not a single Kiwi out of 4.3m of us is interesting in putting a bid in for a pure dairy farming enterprise. Nodoubt there a re a few bids for Restaurant Brands , a company that sells crap food and ****ty coffee ... go figure !!

[1leon]

I didn't say that a high payout was good for Synlait Milk ... I do think this years profit will be very good however based on the current Fonterra payout. I reckon Synlait have probably outsold them and outhedged them so look for some big numbers in the prospectus for 12/13.
Agreed SNLF Unlisted experience is nothing to write home about but at least over 100k share have traded but it is disappointing that the day after a Fonterra announcement of a $7 payout for next season not a single Kiwi out of 4.3m of us is interesting in putting a bid in for a pure dairy farming enterprise. Nodoubt there a re a few bids for Restaurant Brands , a company that sells crap food and ****ty coffee ... go figure !!

I seem to have misconstrued the basis of your enthusiasm. Whilst I also share your enthusiasm for Farms (and hope I haven't misinterpreted those posts) of the 115,000 shares traded on Unlisted you did concede on the one substantial trade that "it would be a coincidence if the buyer wanted exactly 60,000" so it might be that there have only been 55000 shares really traded. I do know at least one Kiwi in 4.3m has genuinely bought! As someone who has been on Unlisted for many years I am not persauded it works at all well in either liquidity or value. I rather doubt any major shareholder would be interested in quiting at the discounts minnows have to accept. Unlisted then tends to be a self defeating circle. I have greatly appreciated your forthright posts on Synlait particularly showing you have real skin in the investment game.

[FarmerHamilton]

I seem to have misconstrued the basis of your enthusiasm. Whilst I also share your enthusiasm for Farms (and hope I haven't misinterpreted those posts) of the 115,000 shares traded on Unlisted you did concede on the one substantial trade that "it would be a coincidence if the buyer wanted exactly 60,000" so it might be that there have only been 55000 shares really traded. I do know at least one Kiwi in 4.3m has genuinely bought! As someone who has been on Unlisted for many years I am not persauded it works at all well in either liquidity or value. I rather doubt any major shareholder would be interested in quiting at the discounts minnows have to accept. Unlisted then tends to be a self defeating circle. I have greatly appreciated your forthright posts on Synlait particularly showing you have real skin in the investment game.

I understand from someone in the know that the shareholders of Synlait Ltd have approved the proposed in specie distribution of the Synlait Milk shares held by Synlait Limited. So the Bright 51% / Synlait Ltd 49% structure is about to become Bright 51% / about 100 other holders 49%. There will be some of those 100 holders who may wish to exit into the IPO ( they have this option ) so I guess the number of holders and the percentage they wish to sell may well be one of the factors determining the size of the IPO ....

With the market looking a bit iffy at present their timing of the IPO may have been a couple of months too late ... ??? Collapsing NZ$ will be good news though as 100% of Synlait Milks revenue is probably generated in other currencies besides the Kiwi$ ( NZD below 80c now , first time for many many months )

[1leon]

I understand from someone in the know that the shareholders of Synlait Ltd have approved the proposed in specie distribution of the Synlait Milk shares held by Synlait Limited. So the Bright 51% / Synlait Ltd 49% structure is about to become Bright 51% / about 100 other holders 49%. There will be some of those 100 holders who may wish to exit into the IPO ( they have this option ) so I guess the number of holders and the percentage they wish to sell may well be one of the factors determining the size of the IPO ....

With the market looking a bit iffy at present their timing of the IPO may have been a couple of months too late ... ??? Collapsing NZ$ will be good news though as 100% of Synlait Milks revenue is probably generated in other currencies besides the Kiwi$ ( NZD below 80c now , first time for many many months )

Those around long enough to recall the sorry history of RJI Limited later Trans Tasman Properties (TTP) and then follow through Fisher &Paykell both ending in compulsory acquistions and the current PGW debacle might seriously wonder if having a majority Chinese shareholder spells the end to an investment opportunity rather than any incentive to take part in an IPO. TTP took a tortuous route to extingushing small holders, Haier had to be forced to up their offer and PGW is about the worst its been after non sensically paying a dividend to meet the needs of Agria.

[FarmerHamilton]

Bright have indicated they will not participate in the IPO so their current 51% stake will be diluted down to probably near 40% so I am assuming they are happy long term investors, I would guess they have an off take agreement which guarantees them a certain tonnage of product at market prices each season. They will also go from having board control to just a representation. If the IPO is big enough to get them in the NZX50 then tracker finds will need to buy and you'd have to think they will be on the radar of the big AgriFunds around the world .

[1leon]

Bright have indicated they will not participate in the IPO so their current 51% stake will be diluted down to probably near 40% so I am assuming they are happy long term investors, I would guess they have an off take agreement which guarantees them a certain tonnage of product at market prices each season. They will also go from having board control to just a representation. If the IPO is big enough to get them in the NZX50 then tracker finds will need to buy and you'd have to think they will be on the radar of the big AgriFunds around the world .

There is a view, with which I don't entirely agree, that 30% is effective control. I wouldn't be entirely sanguine about "probably 40%" if that is in fact what Bright will reduce to. I am very conscious I risk being acused of sino phobia and would be pleased if anyone could provide any examples of Chinese NZ long term investment for the continuing prosperity of all shareholders. If you throw Fonterra ( NZ infant formulas quality again a live issue) and Zespri scandels into the mix,the investment future tends more to the highly speculative than than conservative!
http://www.odt.co.nz/news/national/2...bad-news-china

[FarmerHamilton]

There is a view, with which I don't entirely agree, that 30% is effective control. I wouldn't be entirely sanguine about "probably 40%" if that is in fact what Bright will reduce to. I am very conscious I risk being acused of sino phobia and would be pleased if anyone could provide any examples of Chinese NZ long term investment for the continuing prosperity of all shareholders. If you throw Fonterra ( NZ infant formulas quality again a live issue) and Zespri scandels into the mix,the investment future tends more to the highly speculative than than conservative!
http://www.odt.co.nz/news/national/2...bad-news-china

I agree 40% is still a large shareholding , but I think Bright are reasonably "hand's off" with the day to day management of the stainless steel and leave that to the local experts. They may have more of a say in strategic decisions like the one to go into Lactoferrin , but even then I imagine management have a fair degree of autonomy.

Nice rally in US Stockmarket this a.m. but the Kiwi$ up over 1c ... very volatile the little NZD at present!

[FarmerHamilton]

I agree 40% is still a large shareholding , but I think Bright are reasonably "hand's off" with the day to day management of the stainless steel and leave that to the local experts. They may have more of a say in strategic decisions like the one to go into Lactoferrin , but even then I imagine management have a fair degree of autonomy.

Nice rally in US Stockmarket this a.m. but the Kiwi$ up over 1c ... very volatile the little NZD at present!

I would have thought if the IPO prospectus was on the printing presses then the company would have probably used $0.80c for its FX assumtion for 13/14 season. With the kiwi hitting 11 months lows there may be a need for some re-calculating of the numbers by investors. I imagine with $500m revenue in USD for next season a 1-2c move will be highly leveraged to the bottom line. The hedge book and FX forcasts will make for interesting reading. Just like F&P Healthcare trades very much on the FX movements of the Kiwi/USD cross so may Synlait Milk ...

[NZSilver]

http://www.nzherald.co.nz/business/n...ectid=10892567