Black Crane were first involved in Feb 2017. Here's what Peter...

Black Crane were first involved in Feb 2017. Here's what Peter had to say in his communications.

"This month we commenced a new investment in Wellard, the global #1 live cattle exporter. Wellard has a 22% market share in the export of l ive cattle from Australia and more than 25% market share in the key customer markets of Vietnam and Indonesia. The group also exports cattle from South America into Europe and the Middle East. The company owns the world’s largest fleet of modern, purpose built livestock carriers.

The company was floated on the ASX in December 2015 at A $1.39. Black Crane has acquired an initial stake in the company for A $0.21. The dramatic decline in share price was caused by a significant contraction of margins as a result of unprecedented high cattle prices in Australia. These prices have been driven up by extreme climate conditions in Northern Australia; several years of draught followed by abnormally wet and long wet - seasons led to very strong demand for cattle by produc ers (to re - build their herds known as re - stocking) who in normal conditions would be selling surplus cattle. FY2016 was also marred by crankshaft failures on two sister vessels in the fleet. As a result of these factors the company’s estimated FY2017 EBITD A is only 25% of the pro spectus forecast for 2016 and 36 % of that achieved in 2015.

Our investment thesis is that typical seasonal conditions will resume and cattle prices will return to normal levels post the end of the current re - stocking cycle. The cran kshaft failures are also one - off events. Hence, we see no reason why the company cannot achieve EBITDA in line with its prospectus forecast.

There is further significant upside from the commencement of the China - Australia live cattle trade. Health and quar antine protocols were agreed last year and the first cargo was completed this month. The potential volume of the China trade is very significant relative to the existing trades.
During these tough industry conditions, the company’s balance sheet has become strained as cattle vendors have reduced creditor days and operating cash flow has been lower than expected. We have only made a preliminary investment in anticipation of participating in a potential primary financing to restore the company’s balance sheet strength.

Wellard was founded by the father of the current 20% shareholder and CEO, Mauro Balzarini. The other major shareholder is the Fulida Group, the company’s joint venture partners in a green - field feedlot and processing business in China. Post the IPO, Fulida and Balzarini have not seen eye to eye on governance of the company and the future of the Chinese JV.

Since we made our initial investment, Paul Holmes à Court, owner of one of the largest cattle producers in Australia, has become a 10% shareho lder. Additionally, an unknown Chinese investor has become a 6.5% holder. The presence of several strategic shareholders validates our interest in the company. Our aim is to build consensus amongst the various shareholders on a recovery plan for the company."

I will trawl through my emails and see if I can find anything else that may be of assistance to some.

St.B