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  1. #151
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    Quote Originally Posted by kiora View Post
    And PakNsave $19.99 for vaccum packed eye fillet from Greenlea ???
    Cheap as....!

    Crazy. PNS won't be doing it for nothing....

  2. #152
    ShareTrader Legend Beagle's Avatar
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    Okay... so my friends have been highlighting this one as a possible investment and at first glance the shares look stupidly cheap BUT meat processors have a truly shocking, actually notoriously shocking track record of massive swings in profitability (and I am still very time poor this week), so what I will do is pose some devil's advocate questions and seek feedback.

    Co-op structure leads to an ill defined dividend policy.
    What exactly is their policy in terms of payout's for patronage reward v dividends ?
    Last year they paid a 3 cent patronage reward but no dividend ? Why were suppliers favored over shareholders ?
    What evidence is there to suggest this is anything other than a pure cyclical stock ?
    Normal PE valuation methods appear flawed in that there appears to be no set methodology for distribution of profits and a share is ultimately only ever worth the net present value of what it can pay you in dividends over its lifetime so a dividend yield valuation model seems most appropriate to me.

    Assuming for a moment this is a pure cyclical company and looking at their dividend history over the last 3 years they have paid 2.8 cents, 0 cents and 5.4 cents, total 8.2 cents = average 2.73 cents. Grossing this up for imputation credits gives gross average payments of 3.79 cents per share per annum. If I expect a 7% gross return from a no growth cyclical company an average annual return of 3.79 cents suggests the shares to me are worth 3.79 / 0.07 = 54 cents.

    I invite a full rebuttal from those invested as to why their investment thesis is different and a higher valuation is warranted and look forward to reading people's responses.
    Last edited by Beagle; 10-08-2020 at 11:18 AM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  3. #153
    percy
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    https://usx.co.nz/uploads/paperclip/...pdf?1586919432
    https://usx.co.nz/uploads/paperclip/...pdf?1587091395
    https://usx.co.nz/uploads/paperclip/...pdf?1595478544

    So Silver Fern CoOp owns 50% of Silver Fern Farms Ltd.The other 50%owner is Chinese Shanghai Maling.
    The CoOp's earnings are equity accounted.
    SFF [Unlisted].
    100,378,874 shares on issue at 65.1 cents gives a market cap of $65,346,647
    eps 34.78 cps
    PE..1.872 yes one point eight seven two....Note PE ratio is under 2 [two].
    Net dividend per share 5.4 cps [in the bank this Friday]
    Net dividend yield is 8.29% over 12 % gross.[ie fully imputed].
    Equity ratio 81.93%
    ROE 12.2%.This is based on their Total Equity of $304 mil.
    Dividend policy of SFF Ltd.Minimum 30% of NPAT with target of 50% NPAT split 50/50 between CoOp and Shanghai Maling.
    Note the latest payment was 37.5%.
    I believe there is a strong future for "New Zealand grass feed red meats.".

    My Valuation...$1.30....[note twice current share price].
    Last edited by percy; 10-08-2020 at 01:39 PM.

  4. #154
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    Good points Beagle.
    As percy has pointed out, the operating company has a clear dividend policy of paying out a minimum of 30% of NPAT to its 2 equal shareholders, SFF (Co-op) and Shanghai Maling.
    You are correct that for the FY18 they paid out no dividend, due to a very poor year.

    Once SFF receives its dividend from the operating company, its first step is to ascertain any need to cover operating deficits which includes cost of its own Board as well as its representatives on the SFF Ltd Board.
    This year they also decided to keep $4.5m to replenish reserves to cover themselves should they not receive divies from SFF Ltd in future years.
    Once they decide on a pool to be distributed, the formula they use to decide on a split is that a MINIMUM of 65% should be paid out as dividend and MAXIMUM 35% as Patronage Reward. As I said above, 2018 was an exception due to a low dividend.

    Of interest is that SFF Ltd has a clear strategy that it has been implementing for a couple of years now, on where it is going and where it wants to be. There is a strong focus on capital investment to have best practice operation to deliver the "Plate to Pasture" market lead plan. They have clear goals on greenhouse gas emissions reductions and marketing. This focus has resulted in SFF Ltd being in the strongest financial position it has been in for the last 10 years with a goal of $150m aggregated profit over the 5 years period to 2023. It looks clear to me that Shanghai Maling has been a good partner and inserted some strong business focus to the company.

    COVID has resulted in more consumer awareness and people now, more than ever, want to know where their food comes from and that it is clean and safe. Grass fed red meat meets that increased awareness perfectly.
    Last edited by iceman; 10-08-2020 at 02:26 PM.

  5. #155
    ShareTrader Legend Beagle's Avatar
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    Many thanks Percy and Iceman. I really appreciate you sharing your opinions and helpful links both above and by email..

    My initial reservations include:-

    I find Shanghai Malings effective control over SFF Ltd to be a concern here. They're part of the Bright Dairy group and as major shareholders of Synlait and with representatives on the board I'm on record several times as calling their strategy at Pokeno to not only be extremely risky but also the actions of progressing the building and commissioning of that facility, flying in the face of a high court ruling against them but proceeding to build anyway and risking the combined total of the last 6 years of Synlait's profits on a supreme court outcome...this is gross recklessness in the most extreme way I can recall for many many years.

    The jury is out, (almost literally, awaiting a decision by the Supreme court) on whether this is one of the greatest corporate risk management fiasco's of recent years or not. I would have expected them to exert their influence as major shareholders and with directors on the board to manage the risk more proactively.

    I assume there are different Chinese executives involved in SFF ltd than Synlait ? Even so I see effective Chinese operational control of SFF Ltd as a real negative most especially in the current extremely hostile, (effectively almost a cold war), geopolitical climate. The risk of corporate malfeasance such as for example transfer pricing at inappropriate prices, (sales of large quantities of products to friendly parties in China at below their true open market export value), has to be considered as being a serious risk here especially in the light of historical razor thin margins in this industry. Do I trust Shanghai Maling to run a clean and honest operation ?...that is the $64,000 question.

    I have an elephants memory for deals where Kiwi shareholders have been treated very badly by Chinese controlling interests so I will tread very, very carefully and slowly looking further into this one.
    Last edited by Beagle; 10-08-2020 at 04:29 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  6. #156
    percy
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    http://www.silverfernfarms.co.uk/ass...6-2015-web.pdf

    Pages 25 and 26 sets out the safe guards of the Shanghai Maling casting vote.
    Look more than satisfactory to me.
    Last edited by percy; 10-08-2020 at 05:44 PM.

  7. #157
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    Page 26 of what percy ? Your link is to a 2 pages media release

  8. #158
    percy
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    Quote Originally Posted by iceman View Post
    Page 26 of what percy ? Your link is to a 2 pages media release
    I found it I found it.
    Was not where i expected it.....
    Long story but I found it.
    Try it again....it really works..
    Thank you Wilkipedia.......lol.http://www.silverfernfarms.co.uk/ass...6-2015-web.pdf
    Last edited by percy; 10-08-2020 at 05:45 PM.

  9. #159
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    Thanks percy. I agree. This looks satisfactory.

  10. #160
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    Like Mr B have had similar results in business dealings with PRC & wary of businesses tying up with a Chinese partner
    But in SFF case the partnership has been a win win for both parties & has been good for SFF NZ shareholders

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