Investment case over Last 10 years Agribusiness - Production areas planted average 35% -40% of previous 16 years due to lack of water. Water - increase in valuation + 100% (say 8% pa. compound)
A number of capital raisings have occurred increasing the no. of shares from 38 m. to 158 m. = 4.2 times Decrease in bk.val. per shr. $1.21 to $ 0.48 (excludes dilution of 5 for 8 cap. raising)
Therefore bk Val. should be 4.2 x $1.21 = $5.82 ( current sp. 40c.)
Cashflow per shr. Totals - 13c. (-1.3c. pa.)
Earnings per shr. Totals -56c. (-5.6c. pa.) @ a pe. of 10.0 on a shr. Price of $1.00 - eps over 10 years would be (+10c.pa.)
The 2010 crop was sold for approx the same price as 9 years ago ie approx. $550 a bale. The current spot for cotton now is $650 bale. The increase in the price of cotton over 10 years does not even keep up with inflation.
Fabric producers are adding cheaper chemically produced fibres as the price of cotton increases - which then reduces the demand for cotton.
Water - the larger profits with water rights are during dry periods and drought. 2 factors mitigating profits here are
1. The maximum price farmers can pay for water to produce a crop which can be sold at a profit on the world markets . 2. During dry periods the rationing of water allowance by the water authority may offset increased profits from higher water prices.
Further , by coincidence, I have visited the areas of Tandous investments a number of times over the years and seen the Darling as just a gutter barely flowing, and the Menindee lakes as dry paddocks .
I have spent the time with this looking at Tandou in different ways because I would like it to be a goer . but can not make out any investment case what so ever.
TAN Price at posting:
38.6¢ Sentiment: Sell Disclosure: Not Held
