I support your general comments Markhill, and thought i would add a few additional facts that might be considered in evaluating the potential for Seafarms.
While SFG currently operates prawn farms in N Qld, producing 1,800 tonnes or around a third of Australia's farmed prawns, it considers those operations as a testing ground (“pilot”) for the substantially larger Project Sea Dragon, PSD.
PSD, by world production standards will probably be the largest single facility for grow out ponds, but will not add considerably to total world prawn production. World production has been affected by a reducing wild catch component, and a series of disease issues in countries (including Australia) where biosecurity has been lax or compromised by various factors. PSD has been designed specifically to remove considerable risk in relation to biosecurity.
SFG has undertaken a feasibility study on PSD, but no detailed information has ever been published on the outcome of that study. Thus any comments re IRR for PSD are questionable – note that in recent years there's been no broker coverage. I'm of the view SFG has refrained from providing financial information from the feasibility study due to ongoing negotiations with parties re this final funding package being sought.
In general we know that SFG forecasts total annual sales revenue of ca $3 billion, and total production of 150,000 tonnes of black tiger prawns from 10,000 hectares of grow out ponds, with total capex around US$1.5 billion.
I have modelled a staged build up of production, and cash flows, for 100% of PSD, and consider the project is worth in excess of $10 billion.
The big questions, which only time can answer (and assuming things proceed as I expect), are what debt and equity contributions to capex will there be, what final equity SFG will hold in PSD, and what additional shares will be issued by SFG. Until we know the answer to those questions no one can predict the value of PSD to SFG (per share).
Based on my assumptions I'm of the view that final share price valuation could be within the range of $1.00 - $3.50. But its so dependent on the extent of debt available, particularly lower cost NAIF funding.
Discussions re a future share consolidation are certainly extremely premature, and not necessarily relevant – if the shares are ultimately worth $1.00, and you had a 1 for 10 share consolidation then the share price on a post-consolidated basis is $10.00. So it means little, and note that many “blue chip” shares (for want of a better word!) have a couple billion shares on issue – note that FMG actually went the other way, with 1 share split into 5 separate share units! So share consolidation is irrelevant.
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