'holy grail' of biofuels, page-6

Was a holder , in fact thought it would be a long term income generator.

The MIS sales generate income in cash at 30 June of each year unless they provide the finance. Many companies used to off load these debts to bankers who would take over debt management. This seems to have dried up.

The problem with MIS is that the previous assumptions of regular sales in each year are not necessarily true. WFL were honest in deferring income as it had been paid upfront for services to be rendered in the future. However the cash flow cannot be deferred so in the cash flow statements they recognise the cash flow as and when received.

The challenges for me on this one is MIS.

I think the company is well run.

I think they have been upfront with everyone in the way they run the company.

However MIS in its past form seems mortally wounded. Now some sales will be made and as the companies offering it reduce each year WFL may be okay. However the overhang is the fact that they have to have a certain minimum sales level each year to fund the maintenance charges and keep the process going forward. They are using some of the cash flow of new sales to service trees of past sales. Until they get to a stable base of harvest equalling plantings in each year they cannot get the cash flows needed. Most (including WFL as far as I can tell) ramped up their plantings when demand was growing so the cycle still has many years to run before it is in balance again. Its here that I am not sure it can make it through.

On the other side for a company this size to be rebuilding the mill (even in JV) and being a cornerstone investor in green energy (Ethanol) is a bit of a stretch in good times - Now they are in bad times they still have to fund the investments. I tried to unbundle them and came to the conclusion that neither the existing mill nor the Ethanol were in positive cash flow even outside of the capital investment so spending more on these didnt ensure that you would get a return on the next dollar invested. 2011 seems too far away IMO. It may only be next year but thats a long time given your base product MIS is in trouble as an investment process.

Would love to have had a different conclusion but unfortunately the numbers didnt stack up.

Just my investment decision analysis maybe you came to a different one.