potential profitability, page-2

They also say they have already planted 300000acres and expected to produce 300000tonnes worth $US200million. That's quite a bit coming onstream already.

I suppose the big question is the profit margins. Most of this is done through small farmers who have to make a decent profit and pay back credit (arranged through Mission and an Indian bank). So it seems pretty hard to predict profit margins. The great thing is that they will get all the value added from milling through to biodiesel sales...unlike GEM with NFL.

One thing I wonder is how tightly the small farmers are tied to Mission through the credit arrangement. IF this takes off, the technology is pretty simple so you'd imagine you might have other biodiesel producers popping up. That's why I ask. Another thing to consider is with the business model of using lots of small farmers, you'd have to make it worth their while to deliver small lots to collection points (i.e. lots of accumulated transport costs). This suggests to me large margins could quickly be competed away (not necessarily a bad thing from a environmental and social perspective).

Having said that, if Jatopha does take off, Mission might be able to make more from seedling sales for quite a few more years yet than it does form milling.

You'd also expect them to open a plant in India in the next couple of years.

Overall, even if margins are slim say 5%, I think this one still has a viable business model (25x25000000=$62.5million). You might want to cut that in half too to account for inflated output/acre figures. That is still pretty large relative to market cap today. The other thing is that the company is already cash flow positive so dilution (apart from probably a refinery in india) is going to be minimal hopefully (unlike the ozzie based biofuelers). If its going to work, it will be on an even bigger scale than what they have suggested I think - especially given India's stated policy of improving it energy independence (i.e. maybe there will be subsidies). So I don't see that 1.25 million acres as a limit. Also, if it does expand, they are well placed to benefit as a supplier too. I think we can safely say that Jatropha will produce the oil and that oil prices will start rising again. I think even using very conversative assumptions the current share price is under valued significantly. That is not accounting for the significant upside. In terms of upside, I really think the issue of entry of competitors is a big unknown. However, if margins turn out to be quite large, this will be huge.
All of these sidesteps the Malaysian operations using CPO...which seems to be going in the right direction too.