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Thread: Blue Sky Meats

  1. #21
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    Default Rain Stopped Play

    Well, it's all called off. Due to rain, apparently. And no OIO approval by 20 March.

  2. #22
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    Quote Originally Posted by GTM 3442 View Post
    Well, it's all called off. Due to rain, apparently. And no OIO approval by 20 March.
    Didn't really seem like a lot of time, especially as think took them a long time to get their first plant purchase through in Oamaru. But then again, have 1 plant, what is the difference to having two plants?

  3. #23
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    Record profit. Aside from all the corporate speak, shows also the benefit of throughput - up 25%. Must have declined over the years.

    $25.4m for takeover might now seem cheap....

    https://www.odt.co.nz/rural-life/red...ts-record-high

  4. #24
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    Certainly an incredible turn around,after years in the wilderness.
    Wanting to spend $11mil of capital.?
    Hopefully they will post an agm presentation, and some guidance.

  5. #25
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    Having the sale to the Chinese turned down certainly seems to have galvanized them!

    Long may it continue!

  6. #26
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    Trading at a PE of 4, and around 60% of NTA. Dividend payout poor however.

    Does anyone know much about this company, and why the capex/reinvestment costs are so high (they state most of it is just to maintain operations)?

  7. #27
    percy
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    Maybe the big capital expenditure is a concern,taking into account their market cap is currently under $15mil..?

    The current plant capacity infrastructure at Morton Mains continues to constrain growth opportunities. However, additional throughput was still achieved, and an $11 million capital expenditure program is now underway to address constraints, increase efficiency, reduce physical hazards and improve environmental performance.

  8. #28
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    Quote Originally Posted by Gerald View Post
    Trading at a PE of 4, and around 60% of NTA. Dividend payout poor however.

    Does anyone know much about this company, and why the capex/reinvestment costs are so high (they state most of it is just to maintain operations)?
    Probably have to look back over recent years why it is trading at PE of 4. Historically been a solid yet unspectacular performer through its history, but made losses of around $2m in 2016 & 2017, before returning to profitability the last couple of years. Turnover was circa $140m last FY, and made $3.6m net, which is a good effort but traditionally the industry runs on low-ish margins.

    They've had a change of strategy, new CEO and new cornerstone (Chinese) shareholder - who at one stage made a takeover offer (at $2.20/share). There are 4 long-term main shareholders which hold circa 63%. Rest is small shareholders and would say likely farmers/suppliers - can be in the top 10 with only 60,000 shares/$80k worth.

    Looks like last season they processed more lambs.....much greater efficiencies/lower cost of product. Without being privy to the figures, can see that their EU quota was well down (which is a 3-year rolling average of their share of the national production). With lamb numbers overall having decreased over the years, especially in Southland with dairy, then lower share of a declining market isn't a good place to be. Appears that they've arrested that in the time being - last annual report said that number of livestock processed was 742,000, up 25%.

    A few years ago they bought an old plant in Gore, with the goal of processing beef - which I think was a bit of a lemon. Lost money, shut it down and now using for petfood. Probably only paid a couple of mil for it, now getting some revenue/benefit packing ingredients for petfood.

    I wouldn't get hung up about NTA. A meat plant in the middle of nowhere in Southland wouldn't have the greatest residual value. Probably the land it sits on is the most value thing (ironically for dairying).

    They say their capital expenditure programme is being funded out of cashflow. Some of it will be capital stuff, but expect some will have some payback out of it.

    When the takeover was on 2-3 years ago, they stated that <1% of their production was sold chilled - which cannot stress enough that this was absolutely shocking and simply unbelievable!! (what were their sales staff doing??) Just a lost opportunity, and see they have stated some growth and looking at their latest AR would say they are up to about 9% chilled - so good progress but still some what to go. Basically doesn't cost them much more to produce - but sells at a higher price, better cashflow and missing that revenue. Back at the same time - they identified they had a yield 3% lower than the industry - again a lost opportunity, which hopefully they are addressing.

    My guess is they probably had a reasonable first 6 months, but 2nd HY would be tougher - due to sales into China through February and now 2m separation rules in plant and the resulting inefficiencies through the lockdown. Expect inventory would be decreased this year, and FX would be a good tail wind.

    SFF should report next week, so their result may give a little guide (apparently a pretty strong result), but their FY ended 31/12.
    Last edited by Sideshow Bob; 12-04-2020 at 12:10 PM.

  9. #29
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    Quote Originally Posted by Sideshow Bob View Post
    Probably have to look back over recent years why it is trading at PE of 4. Historically been a solid yet unspectacular performer through its history, but made losses of around $2m in 2016 & 2017, before returning to profitability the last couple of years. Turnover was circa $140m last FY, and made $3.6m net, which is a good effort but traditionally the industry runs on low-ish margins.

    They've had a change of strategy, new CEO and new cornerstone (Chinese) shareholder - who at one stage made a takeover offer (at $2.20/share). There are 4 long-term main shareholders which hold circa 63%. Rest is small shareholders and would say likely farmers/suppliers - can be in the top 10 with only 60,000 shares/$80k worth.

    Looks like last season they processed more lambs.....much greater efficiencies/lower cost of product. Without being privy to the figures, can see that their EU quota was well down (which is a 3-year rolling average of their share of the national production). With lamb numbers overall having decreased over the years, especially in Southland with dairy, then lower share of a declining market isn't a good place to be. Appears that they've arrested that in the time being - last annual report said that number of livestock processed was 742,000, up 25%.

    A few years ago they bought an old plant in Gore, with the goal of processing beef - which I think was a bit of a lemon. Lost money, shut it down and now using for petfood. Probably only paid a couple of mil for it, now getting some revenue/benefit packing ingredients for petfood.

    I wouldn't get hung up about NTA. A meat plant in the middle of nowhere in Southland wouldn't have the greatest residual value. Probably the land it sits on is the most value thing (ironically for dairying).

    They say their capital expenditure programme is being funded out of cashflow. Some of it will be capital stuff, but expect some will have some payback out of it.

    When the takeover was on 2-3 years ago, they stated that <1% of their production was sold chilled - which cannot stress enough that this was absolutely shocking and simply unbelievable!! (what were their sales staff doing??) Just a lost opportunity, and see they have stated some growth and looking at their latest AR would say they are up to about 9% chilled - so good progress but still some what to go. Basically doesn't cost them much more to produce - but sells at a higher price, better cashflow and missing that revenue. Back at the same time - they identified they had a yield 3% lower than the industry - again a lost opportunity, which hopefully they are addressing.

    My guess is they probably had a reasonable first 6 months, but 2nd HY would be tougher - due to sales into China through February and now 2m separation rules in plant and the resulting inefficiencies through the lockdown. Expect inventory would be decreased this year, and FX would be a good tail wind.

    SFF should report next week, so their result may give a little guide (apparently a pretty strong result), but their FY ended 31/12.
    Thanks for that

  10. #30
    percy
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    Quote Originally Posted by Gerald View Post
    Thanks for that
    Yes thank you Sideshow Bob.

  11. #31
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    Furthermore....in terms of future (share) prospects....

    Not sure on the potential for any future takeover. Binxi probably had their chance and didn't take it. In recent times they've had their own issues with their plant in Oamaru (exports to China suspended - now reinstated. Closed for a few months). Probably have some sort of relationship/influence over Chinese sales, so may not need takeover. Any further increase in Binxi SH would trigger a full takeover.

    They largely failed in their foray into beef, with the purchase of the Gore plant, and then shut it down. Think the plant would have significant issues, and would need to spend some money on it. Also, at the same time Alliance is trying to expand their beef production. When it works, beef can be very profitable - but there is potentially room for a niche, well-run efficient operation to take on the bigger boys.

    Otherwise the company has been around since about 1987 (I think). Shown no growth/expansion etc. Operating in a geographic area dominated by Alliance/SFF and potentially opportunities to take on the bigger boys - again as niche, operating efficient processor. It has been this for many years, having a better utilisation of their plant compared to others in the area. But seems like they have lost their way. One plus in the current environment, is if unemployment increases, may be better placed for labour - ensuring fully staffed and lower staff turnover.....

    Their 2nd largest shareholder is Lowe Corp - Hawkes Bay-based renderers/skin company - so logically could be some connection/relationship there.

    In terms of investing, I would be looking for them to be consistently profitable, livestock numbers on better levels (lower cost per unit), better returns out of rendering/petfoods, increasing chilled (more margin) and better operational stats (ie yield). Would also want to see the end of the capital expenditure programme and a return to dividends (given lack of growth). Shares are very illiquid, so would have to maybe wait for an entry point and be a long-term hold.

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