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15/04/15

09:41

Post #: 15089038
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Originally posted by Didak ↑

Hi mrhammond,

I agree with your points. I have been doing lots of research on this company since july 13. It is stock not for the fainthearted as the egg industry is so much under public influence and the results over the years were quite poor.

However since they embarked on the new journey of restructuring for free range, the financials turned around for them. In regards to your points there are few interesting points to notice in the Feb 15 Half Yearly accounts:

1. Biological Assets went down which tells me that together with 600k impairment of assets they are reducing the machinery and flock for caged eggs. That also equals lower cost of feed, maintenance and labor = higher operating cash flow

2. Receivables and payable are near ratio of 1, and i believe they can achieve it by june or at least Q1'16.

3. Debt reduction should be now down from 10mil to around 8mil and probably 6 mil by june. They might be debt free by April 2016.

4. Operating cash flow if super strong =4.7mil . We are probably looking at around 8 mil operating c/flow this year. If they can maintain it for years to come, they will start piling up cash = dividends.

5. Their true net profit is not 2.1mil but 2.6 mil, this impairment is one off and I don't see them buying back cage equipment. Potentially we are looking at 3 mil npat this year. I strongly believe they can maintain it for the years to come, especially once debt is off the books.

Also they started new products of 950ml, this is great to reduce oversupply rather than packing it into 10kg bags. Cage eggs probably will never go away, because some families basically cannot afford free range, so once they find the balance, it should reduce the costs.

So as you, I also believe this stock is still undervalued at 0.300, and once ACCC case if over this will attract investors. And other investors seem to think the same, as there are no substantial sellers. Good sign!
Cheers

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didak - good post
however you and Mr hammond have neglected the fact they run it like their own little fiefdom! refer some of gpsas's posts - that is another reason the share price is discounted

FRM Price at posting: 30.0¢ Sentiment: Hold Disclosure: Held
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Last 29.5¢		Change 0.005(1.72%)		Mkt cap ! $68.08M

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