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CCF carbon conscious limited

4.35%

12.0¢

Clarification - please read this article, page-6

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wombat53

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12/01/16

01:07

Post #: 16774368
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Originally posted by chris1983 ↑

Its all in the Annual report. I have added most important info and the link to the report.

"Carbon Conscious has long term management contracts (out till 2027 in Australia) with major counterparties. The management contracts underpin the cash-flow of the business with circa $32 million in contracted revenue to be received out till 2027 from Australia and further revenue from annual spot sales of approximately NZ $8 million from New Zealand. The net present value of the existing business cash-flow (discount rate 8%) is approximately $25 million.

On 9 November the Company announced that it has terminated its agreement in New Zealand under mutual agreement with its customer. The outcome for the Company is that its revenue from NZU sales is no longer contracted, but can still be generated from on market sales. In addition the Company is now in a position to sell the land and forestry assets, which are expected to generate between NZ $3 million to $4 million, which if realised, will be applied to reduce debt to zero and the balance will be applied to accelerate new business opportunities in Western Australian dairy.

In 2015 the Company is pleased to have reduced debt by circa $1.8 million, with a further $0.3 million having been repaid since the reporting date. The Company advised on 2 November that all convertible notes have been repaid and that our expectations are that debt will be reduced to zero by November 2016 – sooner if the New Zealand assets are sold."

http://www.carbonconscious.com.au/assets/reports/Carbon-Conscious-2015-Annual-Financial-Report.pdf

I understand why the company was trading at a discount previously when they were focussed on Carbon credits but I see a clear vision now from the recent announcement and IMO its time for a re-rating. The agreement isn't binding as yet but once it is I believe we will be heavily re-rated. The Chinese involvement is very important and these guys have spent a lot of cash acquiring the farm and infrastructure and they are spending a lot more expanding their chains in China. This is a very good deal. Key point below is we don't need to make a substantial capital investment to get production going. The Infrastructure is already in place to support 25 million litres of milk production. Investors haven't fully woken up to the potential. I'm surprised by the retrace but again it was a poor day on the market and day traders were exiting.

"The property provides Carbon Conscious with the ability to rapidly expand milk production without a substantial capital investment tied up in land and infrastructure, thereby lowering production expansion risk and improving returns on capital. The Company continues to look at other long-term lease opportunities for land and infrastructure to help facilitate an increase in milk supply to match demand over time.

From the annual report they advise..

The net present value of the existing business cash-flow (discount rate 8%) is approximately $25 million.

Current market cap - 137,599,988 (ordinary shares) x 0.15 = 20.6 million

So we are trading at a discount and no value is being added for recent deal. I topped up today with another small parcel at 18 cents and was surprised to see her drop to 15 after running my numbers.

"There are several other ways to determine the value of a company. One good way is to determine the net present value of its future cash flow, or income. This gives the buyer an idea of what the return on investment will be. If a company's market cap is lower than the net present value of its cash flow, then it is undervalue, and a candidate for takeover."

http://useconomy.about.com/od/glossary/g/Capitalization.htm

Expand

@chris1983 Thanks for this.
So we are saying it's undervalued by NPV - current MC = 25M - 20.6M = 4.4M
4.4/20.6 = 21%, implying a fair share price of 21% over 15c = 18.3c.
This excludes any potential revenue stream from the proposed deal. Valuing that is - I suggest - difficult to do, but people do it all the time, estimate the stream of future earnings, but I don't see any valuation here, or anywhere. Analysts eat these things up for breakfast.

Earnings matter. The image below is taken from the most recent CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, Annual Financial Statement Sept 2015.
The earnings are a bit above the Australian's median income.

Has anyone done a DCF (Warren Buffet's favorite technique)?
http://www.stockopedia.com/content/valuation-101-how-to-do-a-discounted-cashflow-analysis-63489/

Last edited by wombat53: 12/01/16

CCF Price at posting: 15.0¢ Sentiment: Hold Disclosure: Held
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