re: Ann: Expansion Program and Revenue Projec... Could be worse...

re: Ann: Expansion Program and Revenue Projec... Could be worse yet and they opt for some convertible note programme. (Okay if they could issue to shareholders like IMF rather than some vulture fund arrangement like ISF).

I re-read the update and, in my view, there was nothing really new in it barring the details of finance required and staging of expansion - they'd already given us the revenue projections, 5 year growth plan using NT purchase, emphasis on improving quality, own-marketing strategy etc. So, in my view, this disclosure was mostly about financing requirements - indicative of what would be disclosed to a potential financier, although probably not a bank since confidentiality could reasonably be expected there.

Note also that their loan from CBA was in default at 31 Dec last year due to net assets below $23m and presumably remains so. Therefore, it is unlikely they would be able to increase borrowing significantly via that avenue. They may even wish to repay some of it.

So agree they may be looking for a secondary lender. But could also be any other mix of equity/quasi-equity (e.g. pref shares) to sophisticated investors - I don't read this as a prelude to going back to shareholders and probably the large holding by Birkbeck makes an spp unpalatable for him - as well as higher risk of failure. Rights issue would be expensive relative to amount required.

Re the marketing end, I don't understand quite what happened to Autore - at some point in the crisis, they became seen as a "sinking ship" and at least some of their suppliers were forced to take a direct market strategy. I think for ATP, the retail outlet strategy is a way of ensuring they have an outlet for a proportion of their own pearls and therefore aren't forced to become as commoditised. And the reality is that the more SSP's are produced by the likes of ATP and APB, the more of a commodity they become. ATP's lower production cost becomes key, but they are squeezed at the other end by the rapid improvements in the much lower cost freshwater pearls. Improving quality will help and any benefits they can obtain from their genetic improvement programmes are essential.