your statement that "no capital raisings are required to fund land acquisition" does not appear to be supported by the facts as CCF has raised capital several times, and as recently as December!
In FY11, CCF raised $6.7m from debt/equity sources (including $2.7m in equity and $4m in debt) which was applied to investments of $5.6m, mainly the purchase of land. Net operating cashflows were - $0.2m which funded a slight increase in working capital. Keep in mind that 2011 was a relatively quiet planting season, 2012's will be much larger which should require even more substantial investment from CCF.
If CCF could get access to the revenue upside without needing to pay for the land, I would agree that would be a much more attractive model as it would offer higher returns on shareholder capital. However if CCF could grow without the need to buy the land, surely CCF would be doing that already. However there is no evidence of this occuring in the accounts that I can see, and there is no reference that I can recall to those alternative models in the analyst report. Rather, we have a company that reported NPAT of $0.8m in FY11 yet saw a deficit of operating and investing cashflows of $5.7m.
The statement of cashflows for 1H12 released recently where cashflows were strongly positive appears to include some in-advance payments for the 2012 planting season (see announcements in November that Origin gave the greenlight to accelerate plantings). CCF's cashflows should be strongly negative for the next two quarters as the company plants the trees (unless they receive further in-advance payments) and overall I would expect the company to bleed cash for the whole year.
That's if my interpretation of the business model is correct. I'm happy to be corrected. If someone could clearly explain the cashflows vs revenue recognition on a 10,000ha block of trees over the life of the project that would be terrific. However that explanation would also have to square with the reported financials.
CCF Price at posting:
28.5¢ Sentiment: None Disclosure: Not Held
