Seeka

[RTM]

Before I start...I hold both SCL and SEK and am considering buying a few more SEK. Accordingly I reviewed the SEEKA 2014 report yesterday. I was surprised how ignorant I was with respect to SEK. Below are a couple of questions that other investors may be able to help me with....as well as a few little facts I gleened.

1) SCL ($269Mil) is significantly bigger than SEK ($50Mil) Personally I would prefer the bigger company as it probably has more resilience.
2) SCL's owns a substantial portion of its orchards. SEK contracts growers. I like the concept of controlling the chain start to finish, although I am sure SEK has great relationships with its suppliers, many of whom are shareholders. Maybe this lack of landholding accounts for a lot of the difference in Market Cap ?
3)SEK has two major share holders, one Japanese (18%) and Te Awanui Huka Pak (16%). This seems OK. Great to see our local Maori folk with a substantial share holding in a developing NZ company. Nice to see some of that treaty money well invested. And the Japanese holder is linked to marketing the product in Japan...a good fit. Not sure re SCL
4)There is a scheme to incentivise suppliers to stay with SEEKA in the form of issuing shares.
In 2014 this diluted the share total by 4%
5) There is a scheme to incentivise employees.
In 2014 this diluted the share total by nearly 3%
So between 4) and 5) the value of my shares was diluted by ~7%
This doesn't seem great, I am not sure how this would compare with other companies.

My questions are....where do these shares come from ? Are they simply new shares created for this purpose ? On page 25 of the report....item c...there is a note with respect to the Employee Share Scheme...and above that a line in the table:
Held by SEEKA Employee Share Plan Trustees 693,442 (2014 shares) etc.
Does this line mean that the Employee Incentive Shares are already in the overall count...and are therefore not dilutive when issues to the employees ? However...give that they issued 429.6K, they would need to top this up again for the following year ? Can anyone help my understanding on this. As you can probably see...my career was not in finance !
Thanks in advance for any help.
RTM

[silverblizzard888]

Article about Seeka if anyones interested "Seeka hits target in Australia"

http://agrihq.co.nz/article/seeka-hi...-australia?p=1

[percy]

Article about Seeka if anyones interested "Seeka hits target in Australia"

http://agrihq.co.nz/article/seeka-hi...-australia?p=1

Thanks for the link.
A very interesting article.

[RTM]

Article about Seeka if anyones interested "Seeka hits target in Australia"

http://agrihq.co.nz/article/seeka-hi...-australia?p=1

Yes, interested. Appreciate you posting the link SB.

[Jay]

Yes thanks sb.
I have a cousin living in Shepparton, he did mention a while ago that some or a lot (cannot quite remember now) of their orchards were starting to disappear or will be disappearing he thought - supplies the local SPC cannery.
So it look like some is has/ is being converted to Kiwifruit.

RTM re point 1 - hopefully they will grow to a bigger company so a little more riskier than Scales perhaps

[iceman]

Before I start...I hold both SCL and SEK and am considering buying a few more SEK. Accordingly I reviewed the SEEKA 2014 report yesterday. I was surprised how ignorant I was with respect to SEK. Below are a couple of questions that other investors may be able to help me with....as well as a few little facts I gleened.

1) SCL ($269Mil) is significantly bigger than SEK ($50Mil) Personally I would prefer the bigger company as it probably has more resilience.
2) SCL's owns a substantial portion of its orchards. SEK contracts growers. I like the concept of controlling the chain start to finish, although I am sure SEK has great relationships with its suppliers, many of whom are shareholders. Maybe this lack of landholding accounts for a lot of the difference in Market Cap ?
3)SEK has two major share holders, one Japanese (18%) and Te Awanui Huka Pak (16%). This seems OK. Great to see our local Maori folk with a substantial share holding in a developing NZ company. Nice to see some of that treaty money well invested. And the Japanese holder is linked to marketing the product in Japan...a good fit. Not sure re SCL
4)There is a scheme to incentivise suppliers to stay with SEEKA in the form of issuing shares.
In 2014 this diluted the share total by 4%
5) There is a scheme to incentivise employees.
In 2014 this diluted the share total by nearly 3%
So between 4) and 5) the value of my shares was diluted by ~7%
This doesn't seem great, I am not sure how this would compare with other companies.

My questions are....where do these shares come from ? Are they simply new shares created for this purpose ? On page 25 of the report....item c...there is a note with respect to the Employee Share Scheme...and above that a line in the table:
Held by SEEKA Employee Share Plan Trustees 693,442 (2014 shares) etc.
Does this line mean that the Employee Incentive Shares are already in the overall count...and are therefore not dilutive when issues to the employees ? However...give that they issued 429.6K, they would need to top this up again for the following year ? Can anyone help my understanding on this. As you can probably see...my career was not in finance !
Thanks in advance for any help.
RTM

Hi RTM,
I'll have a go at answering some of the issues you've raised.

Yes SEK is a much smaller market cap than SCL. But SEK intends to grow quite quickly. This is both an opportunity and a risk for us investors. My guess is we will see a SEK with 3-4x current cap value in 4-5 years time !!!!

The grower share scheme is a 3 year scheme, with 2016 being the last. My understanding is that it was implemented to rebuild long term relationships after the disastrous PSA hit.
I also believe SEK realises they need to increase volumes quickly to justify building more coldstorage facilities. This is one way of doing that and I suspect we will see that happening soon. After all, coldstorage, load out and general handling is where SEK make a large part of their money.
The share scheme is tax deductible from the post harvest EBIDTA but of course is a non cash deduction as its paid for in NEW shares.
I think this scheme is a win win for growers and SH alike.

SEK does have a mix of their own operated orchards (long term leased land though) and grower contractors.
It should be noted they just bought 505 Ha of land in Victoria of which 240 Ha are planted and with full water rights.

I will not attempt to answer re details of the employee scheme. Don' t remember the detail at the top of my head and am in very slow internet connection so can't look for it. But I am relaxed about that. SEK has been building its operational management systems ahead of the anticipated volume increases, that are happening already this year. Prudent stuff and we want good people in those positions, with a bit of skin in the game.

[RTM]

Thanks Iceman, pleased to hear that the Growers Scheme is just 3 years....as 7% total dilution of my shares seems pretty high.

Agree that employees need to be appropriately remunerated. Per the report they have 53 employees earning more than $100K. Not sure of total number of employees. On top of this there does seem to be a fairly generous share entitlement (3% of the total shares is not insignificant) So I hope they are all working at the top of their ability to enhance the value of "our" shares !
Note: I have not been able to benchmark this at all against what other companies are doing. It may be quite a normal number. It just "feels" generous !

Hi RTM,
I'll have a go at answering some of the issues you've raised.

Yes SEK is a much smaller market cap than SCL. But SEK intends to grow quite quickly. This is both an opportunity and a risk for us investors. My guess is we will see a SEK with 3-4x current cap value in 4-5 years time !!!!

The grower share scheme is a 3 year scheme, with 2016 being the last. My understanding is that it was implemented to rebuild long term relationships after the disastrous PSA hit.
I also believe SEK realises they need to increase volumes quickly to justify building more coldstorage facilities. This is one way of doing that and I suspect we will see that happening soon. After all, coldstorage, load out and general handling is where SEK make a large part of their money.
The share scheme is tax deductible from the post harvest EBIDTA but of course is a non cash deduction as its paid for in NEW shares.
I think this scheme is a win win for growers and SH alike.

SEK does have a mix of their own operated orchards (long term leased land though) and grower contractors.
It should be noted they just bought 505 Ha of land in Victoria of which 240 Ha are planted and with full water rights.

I will not attempt to answer re details of the employee scheme. Don' t remember the detail at the top of my head and am in very slow internet connection so can't look for it. But I am relaxed about that. SEK has been building its operational management systems ahead of the anticipated volume increases, that are happening already this year. Prudent stuff and we want good people in those positions, with a bit of skin in the game.

[percy]

Its been really illiquid for many years which can be a prob getting in or out in any but tiny volumes.. Only two trades over 50,000 in 2 years!! .SEK in a sweet spot atm but no change in liquidity. Tradeswell under NTA too although i haven't checked lately.

Were you the buyer of the 608,148 SEK shares traded off market today?

[Joshuatree]

Saw that ,biggest vol in a longlong time. S/P sceamed thru both M/As too like a cleaver thru a lambington..

[iceman]

Great to see Seeka's Banana supplier Sumifru take a SEK stake and become the 3rd biggest SH. A vote of confidence and supportive of SEK becoming a diversified produce supplier. Bring on the HY announcement next week and will be watching with interest whether we get any comments on profit projections for the FY. Normally they provide that in October but this year is probably outstanding so far so one is allowed some optimism !