Synlait Farms Limited (SNLF)

[FarmerHamilton]

Dairy prices fall 7.3%, milk powders down 10% in latest (May 1st) Fonterra auction.

This would make FarmerHamilton disappointed. Further, NBR (last week) mentioned the problem of milk contaminated with chemical DCD in Caterburry farms.

In the past decade, farmers get rich largely by capital gains, which is not certain in the future.

Given the 50% increase since late 2012 ... a 7.3% pullback is not to suprising. I would have not been that suprised to see a 10% pullback , and the next auction may dip again as well. Next years payout still likely to be somewhere between 50c & $1 higher than this year ( still very early I realise ). That would add between 6c & 12c to Synlait Farms earnings ... at 7 P/E that is between 42c and 85c added "value" ... massive leverage going on here !!

DCD ... Synlait Milk produces some of the best quality Infant Formula in the world ... so not a huge issue I dont think.

bid / offer $.92 / $1.00 all trades so far at $1.00 . Total volume traded 65,000 shares

[000831]

unlisted company shares should give significant discount in price due to the asset liquidition problem. When systemic risks comes, investos cannot get ride of the shares and convert into cash assets, simply not buyers in the market, or at very very low price, or limited volume from the buyers. Safety margin is key drive for those companies.

Additionally, the GDT milk price (TWI) seems to reach the peak and continues to drop. Look at the 2012 annual report, it is disgusting, cannot understand at least four things.

We cannot only judge the share price by its net assets/ share, we also need to look at its current performance (PE) and growth prospectives (PEG), and company governce. A company with negative return could lead its net assets/share going down for the next financial year.

Not surprised if SNL price is always trading below 1.00,far away from NET ASSET/SHARE. Personally I do believe that the price should go down to 75c / share to reflect all the current trouble that it has.


However, for long term investors (over 5-10 years) those won't be issues.

[FarmerHamilton]

unlisted company shares should give significant discount in price due to the asset liquidition problem. When systemic risks comes, investos cannot get ride of the shares and convert into cash assets, simply not buyers in the market, or at very very low price, or limited volume from the buyers. Safety margin is key drive for those companies.

Additionally, the GDT milk price (TWI) seems to reach the peak and continues to drop. Look at the 2012 annual report, it is disgusting, cannot understand at least four things.

We cannot only judge the share price by its net assets/ share, we also need to look at its current performance (PE) and growth prospectives (PEG), and company governce. A company with negative return could lead its net assets/share going down for the next financial year.

Not surprised if SNL price is always trading below 1.00,far away from NET ASSET/SHARE. Personally I do believe that the price should go down to 75c / share to reflect all the current trouble that it has.


However, for long term investors (over 5-10 years) those won't be issues.

Synlait Milk to list on NZX probably by August .... Bright to get diluted back under 50% ... all very interesting !!

[Newman]

Synlait Milk Preparing for IPO in New Zealand

http://www.bloomberg.com/news/2013-0...w-zealand.html

Would this IPO give shareholders in Synlait farms the cash to strengthen its balance sheet?

[CJ]

Synlait Milk Preparing for IPO in New Zealand

http://www.bloomberg.com/news/2013-0...w-zealand.html

Would this IPO give shareholders in Synlait farms the cash to strengthen its balance sheet?

Aren't the two companies completely separate now? so the IPO of Milk will have no impact on Farms.

[Newman]

Besides Chinese and Japanese investors a significant portion of shareholders in Synlait Milk are also shareholders in Synlait frams.

[FarmerHamilton]

Besides Chinese and Japanese investors a significant portion of shareholders in Synlait Milk are also shareholders in Synlait frams.

Synlait Milk is currently 51%/49% owned by Bright Dairy and Synlait Limited. All Shareholders in Synlait Farms own all the shares in Synlait Limited apart from Mitsui & Co who cashed out of Synlait Farms recently in the move to the Unlisted but maintained their Synlait Limited shareholding.

It sounds like Synlait Limited will distribute all its Synlait Milk shares to its shareholders so all holders will then have shares in SNLF on the Unlisted exchange and SML shares on the NZX. A far better scenario than a few short weeks ago.

[FarmerHamilton]

The timing of this is interesting ... Synlait Milk may have had an absolute ripper of a season as I imagine they are virtually all sold now of there 2012/13 production. They will have their margin in the bank on what they sold the milk for ( powder , infant formula , AMF ) and have a pretty good idea within 10c / kgMS of what they will pay for the milk. $6.3m last year ... the prospectus will be interesting reading. 31 July balance day so actual Y/E figures are months away still.

[Newman]

Synlait Milk is currently 51%/49% owned by Bright Dairy and Synlait Limited. All Shareholders in Synlait Farms own all the shares in Synlait Limited apart from Mitsui & Co who cashed out of Synlait Farms recently in the move to the Unlisted but maintained their Synlait Limited shareholding.

Any details on the terms and conditions that Mitsui & Co exited Synlait farms?

[FarmerHamilton]

Any details on the terms and conditions that Mitsui & Co exited Synlait farms?

I don't know the exact T&C's but SNLF did get bank funding to buy out Mitsui at a good price for all the remaining holders. All holders now own a 22.5% larger interest in the farms than they did prior to Mitsui departing and bank debt is up by I think about $8m

Mitsui could be an aggressive buyer of Synlait Milk shares in the open market as that was the asset they were most keen to get exposure to. Assuming they own 22.5% of Synlait Limited they have an effective interest of 11.025% in Synlait Milk .... if they wanted to push that up to say 19.9% it could be interesting.