Seeka

[iceman]

Yes it is a good result from an extremely challenging year for SEK management with the fire at Oakside and enormous effort spent on insurance claims.
With that now largely out of the way we can look forward to a more normal year ahead. 2016 should see a large growth in revenue and profit with Seeka Australia coming on line with estimated revenue of $17m and EBIDTA of $ 3.2 - 4.0M instead of the over $1m loss contributed in 2015 (due to timing of purchase).
This will easily offset the increase in interest expenses as a result of the new loans (only 3.95% interest rate) to fund the purchase of that business.

An interesting statement in the commentary is their clear aspiration to increase market cap to $200m, which is more than triple current market cap. A lofty goal which shows management's great optimism for the business.

I would not be surprised to see a doubling of EPS and a healthy increase in dividend in 2016, if we have a good crop and no unforeseen negative issues.
Happy holder

[percy]

Yes it is a good result from an extremely challenging year for SEK management with the fire at Oakside and enormous effort spent on insurance claims.
With that now largely out of the way we can look forward to a more normal year ahead. 2016 should see a large growth in revenue and profit with Seeka Australia coming on line with estimated revenue of $17m and EBIDTA of $ 3.2 - 4.0M instead of the over $1m loss contributed in 2015 (due to timing of purchase).
This will easily offset the increase in interest expenses as a result of the new loans (only 3.95% interest rate) to fund the purchase of that business.

An interesting statement in the commentary is their clear aspiration to increase market cap to $200m, which is more than triple current market cap. A lofty goal which shows management's great optimism for the business.

I would not be surprised to see a doubling of EPS and a healthy increase in dividend in 2016, if we have a good crop and no unforeseen negative issues.
Happy holder

The blue skies are looking even bluer with PSA,and fire issues now behind SEK.
They got through them well.Must be good management/directors.
Plenty of excellent growth opportunities.

[percy]

Thank you Noodles for your calculations,and projections,.
I thought the growth prospects were good when I read the report,but your projections have me really excited.
The eps growth from 46 cents per share, to 62 cents per share is a massive 34.78%.
The forward PE of 6 looks out of place with such a high growth rate.Most probably a PE of 12 would still be modest.[depending on outlook]
So eps of 62 cents x PE 12 and well will have a share price of $7.44,which would be a gain of 98.4% on today's sp of $3.75.
And in the meantime we get the huge dividend yield.!!

[iceman]

Thanks noodles for your great work and sharing.
My numbers are very similar to yours so I have little to add to them except to say that I prefer to use 10% increase in "all other operations", rather than your 5%. It doesn't make much difference to the results though.

SEK has been a very difficult one to value due to their extraordinary year in 2015 with the large building fire in packing season and the resulting fruit loss due to the contaminated bins.
The contamination issue has now been fixed with a huge investment in new generation plastic bins which will also see increased operational efficiencies.
Due to these fire related issues and insurance claims, the 2015 accounts do not really show what a good operational year it would have been without it.

SEK has invested significantly in increased handling and storage capabilities and intends to spend a further $13m this year. It is paramount that this spending will be quickly earnings positive as they have stated will be their aim.
The future volume growth will be coming largely from the Gold variety which is harvested right in the middle of the normal season so this is the reason for the need for increased capacity to deal with the pressures to pack all fruit classes at the same time.

Australia, as you pointed out, is forecast to contribute significantly in 2016 so we will need to watch for progress updates on the integration and operational efficiency improvements there. Half of the fruit in Australia is currently being sold direct to supermarkets with better net returns than other sales. I hope SEK can now use its leverage as the dominant Australasian Kiwifruit (and now more other fruit) ?grower/packer/marketer, to gain more direct supermarket access both in Australia and NZ for a wide variety of fruit.

I do not think we will see the huge increase in dividends you forecast. There is little doubt in my mind that the divie increase will be steady and significant but I would like to see them use a larger proportion of the forecasted profit to reduce debt quicker.
I also believe there is a high chance of SEK using some of that cash to make further strategic acquisitions.

It is also important to note that the grower loyalty program is now entering its final year. Assuming SEK can retain most of the growers (and now SH) in 2017 and beyond, the approx $2.5m annual cost of the grower scheme will be removed.

SEK has great growth potential and a great ability to pay out significant dividends.

Discl. SEK is my biggest holding

[noodles]

I do not think we will see the huge increase in dividends you forecast. There is little doubt in my mind that the divie increase will be steady and significant but I would like to see them use a larger proportion of the forecasted profit to reduce debt quicker.

Yes, I think you are probably right about dividends. Here is their policy:
"Seeka’s intention is to declare dividends each financial year. The annual dividend paymentwill not exceed 75% of operating cashflow net of maintenance capital investment andcontracted debt reduction."

Given the extra capital spend, perhaps the dividend will only increase 10-20%.

I have updated the table in my original post to reflect dividend and a couple of minor mistakes. I've also added the FY15 actual column
http://www.sharetrader.co.nz/showthr...l=1#post609948

[percy]

Yes, I think you are probably right about dividends. Here is their policy:
"Seeka’s intention is to declare dividends each financial year. The annual dividend paymentwill not exceed 75% of operating cashflow net of maintenance capital investment andcontracted debt reduction."

Given the extra capital spend, perhaps the dividend will only increase 10-20%.

My own view is I don't mind accepting a small/modest dividend from a company, if they are putting the funds/capital to better use they I can.
High growth companies need capital.
SEK is a high growth company with plenty of growth avenues both here and Australia.
So their dividend policy makes good sense to me.

[LAC]

Thanks for the projections Noddles, much appreciated.
Not all claims have been finalized by year end - will there be any costs that would carry fwd to 2016 that we should consider?
Smaller divies in favor of acquisitions would be great but I think they might use it towards debt deduction IMO.

[iceman]

Thanks for the projections Noddles, much appreciated.
Not all claims have been finalized by year end - will there be any costs that would carry fwd to 2016 that we should consider?
Smaller divies in favor of acquisitions would be great but I think they might use it towards debt deduction IMO.

I don't think we will see any significant costs carried forward, other than no doubt some legal and consultancy costs. In fact SEK protected their growers in 2015 by paying them $4m which I note noodles has correctly accounted for in the valuation/estimation process. Should SEK receive further insurance payouts for the outstanding claims, my understanding is that the first $4.5m would go to SEK and the rest if any to the grower pool.
But of course there is also the possibility of no further insurance payouts !

[Fisherking]

I'm a happy holder and will look to accumulate given the SP weakness we've seen recently.
The only comment I have regarding your analysis is that SEK are more succeptable to 'acts of god' than some other stocks which will inevitably have some impact on SP.

From what i can see the acquisitions they've made to date have been pretty astute.

[iceman]

So true Fisherking about an "act of God"event. Any company operating in a primary industry (SEK, CVT, SCL, SAN, PGW for example) is very much reliant on Mother Nature being cooperative. But then again, so are our electricity generators with rain fall, tourism (THL,AIA,AIR) with no volcanoes blowing up, Air NZ with no volcanoes/viruses/terrorist attacks.
Most companies face their own risks, real or perceived.

One thing I do like about SEK, is that they worked their way very quickly and very successfully out of an "act of God" situation with the PSA. Been there, done that and hopefully have learned a lot and I think all their current business strategy/diversification shows they learnt from it.