SML - Synlait Milk Ltd

[ratkin]

Phew, thanks Dobbie and Beagle, I thought I had just shot myself in the foot with what I expected to be a trouble-free purchase. I had only checked the stock market advisors -Share Clarity, Yahoo, Simply Wall St - and I saw nothing about a court case. I can cope with SML halving in price, and I'll be delighted if it rises even 5% should a favourable judgement be handed down.

Before buying any share I always read through the approprate thread on this forum, from start to finish. If there is potential problems it will nearly always be flagged in some messages.

[ratkin]

Looks like it will be testing the March lows before too long

[Beagle]

Bring up the 3 month chart since the Supreme court hearing. I think its fair to say the market is not confident they will win.
Must be some very complex issues our top Judges are considering. More than 3 months now since the hearing. That's quite a long time to be deliberating over the issues.

[ratkin]

Bring up the 3 month chart since the Supreme court hearing. I think its fair to say the market is not confident they will win.
Must be some very complex issues our top Judges are considering. More than 3 months now since the hearing. That's quite a long time to be deliberating over the issues.

Maybe they do not have much else to do, and are conveniently dragging it out.

[Beagle]

Maybe they do not have much else to do, and are conveniently dragging it out.

Not sure they get overtime hourly rates or need them http://www.legislation.govt.nz/regul...est/whole.html
$518,400 per annum not too shabby is it !

[Beagle]

Market seems to be expecting a very ordinary result on 28 Sept. Big capital raise coming up to steady the ship ?

https://www.nzx.com/announcements/355358 Took a team of 30 employees more than a year to get this "wonderful" accreditation that a certain regular poster on here keeps extoling as the holy grail of ESG accomplishments.
So how is their absolute mind boggling multi year obsession with all things ESG working out for shareholders ?
It turns out not too well at all Synlait were $12.50 in Sept 2018 and have lost a staggering 53% of their value in the last 2 years when the market is up 25%. What an incredible destruction of shareholder value. I guess that's what happens when people are the planet are equally as important as shareholders ?
Did shareholders approve this dramatic elevation of other considerations at any point and if not how are the directors and management allowed to get away with breeching their fiduciary obligations to act in shareholders best interests ?

But wait there is more....contemporaneously to investing a staggering amount of management's time and resources into their apparent obsession that all things inclusiveness, environmental awareness and the planets rights are equal with shareholders and all other things ESG they have risked the grand sum of the last 6 years of profits gambling that they will get a favorable outcome with the Supreme court hearing.

Even if they win this and everything is okay at Pokeno, managements complete and utter obsession with all things environmental and social and their staggering appetitive for risk with the Pokeno situation means for me this company can never be an investable proposition in the future so today I have removed this company from my watch list. I have no confidence whatsoever that the directors or senior management are working in the best interests of shareholders in fact I would say they have behaved in such a manner as to act directly against shareholders best interests and are highly likely to do so going forward.

Finally, all this has gone on while debt level's have risen to dangerously high level's.

Un-investable at any price in my opinion. A slow motion train wreck...

[chrisw]

Hello Beagle,

I don’t think you are looking at this the right way. While you personally might dislike the ESG concept entirely, what matters for the company’s continued revenue is what it’s customers want (i.e the part that gives shareholders a RoE). For commodity powders it doesn’t really matter as it is all least cost, but for the higher margin specialist powders, multinational companies can source from anywhere. And this latter market is the business the company is in and that it has invested in assets for.

It doesn’t take much industry knowledge to know that in the last 20 years the reputation of dairy has taken a hit. Just look at the statistics for dairy consumption by age group for instance. In NZ the environmental impact is a big issue, but overseas other animal welfare issues come into play as well (let’s not talk too much about bobby calves eh?). In recognition of this certain large companies have pledged publicly to take actions to improve their reputations and have been reporting publicly against this. It is not too much of a stretch of the imagination to think that these same companies are looking for suppliers to help them achieve their goals.

From an investor standpoint there are also other reasons to invest in this area, including staff/supplier retention and growing a consumer brand, but per the shareholders meeting presentations a long term plan to meet the needs of customers is the most logical. If you disagree with this strategy then probably this isn’t a good investment for you.

Long story short: As an investor you don’t have to like ESG to like the margin that an investment like this brings in, in the longer term.

https://www.nzx.com/announcements/355358 Took a team of 30 employees more than a year to get this "wonderful" accreditation that a certain regular poster on here keeps extoling as the holy grail of ESG accomplishments.
So how is their absolute mind boggling multi year obsession with all things ESG working out for shareholders ?
It turns out not too well at all Synlait were $12.50 in Sept 2018 and have lost a staggering 53% of their value in the last 2 years when the market is up 25%. What an incredible destruction of shareholder value. I guess that's what happens when people are the planet are equally as important as shareholders ?
Did shareholders approve this dramatic elevation of other considerations at any point and if not how are the directors and management allowed to get away with breeching their fiduciary obligations to act in shareholders best interests ?

But wait there is more....contemporaneously to investing a staggering amount of management's time and resources into their apparent obsession that all things inclusiveness, environmental awareness and the planets rights are equal with shareholders and all other things ESG they have risked the grand sum of the last 6 years of profits gambling that they will get a favorable outcome with the Supreme court hearing.

...

[Beagle]

Thank you Chris for sharing your point of view.
Welcome to the forum

[winner69]

Aswath Damodaran is well respected finance guy and his work always worth a read.

He seems rather skeptical on this ESG stuff

'Sounding good or doing good' a good title

http://aswathdamodaran.blogspot.com/...skeptical.html

Bit of a long read - might print it off and read properly and give it thought when having the oysters and chips down on the beach ....not today in the wind and rain (destructive storms according to the media - brought on by the irresponsible behaviour of corporates over the years)

[winner69]

beagle -- no doubt you are appalled that the Govt is bringing in the requirement for the big boys to do heaps of work around reporting / disclosing climate change risks etc etc.

More work for the many - including the FMA