KTD Opening Price ?, page-3

Kachitlin,

I had posted this some time back to help consolidate my research and gain some further insight from followers. The below may help guide you as to what is happening with KTD and what to expect within the first few weeks of launch. My sentiments align with Rubes, I think we will have some significant short term growth with scale back followed by progressive long term growth.

The idiom “meat and potatoes” carries with it a metaphoric sentiment of necessity for success. It is the fundamental part or parts of something. This is what I perceive to be the meat and potatoes of Keytone’s success:

• A registered CNCA bolsters Keytone’s ability to penetrate and canon the Asian market. This is an overshadowed competitive ‘ticket’, particularly when you consider Bellamy’s vicious market downtrend in 2017 (among other market factors). Essentially, the CNCA aims to provide a blanket of amnesty to domestic goods by minimising the trade and import of foreign products to dominate the market without quality control. The fact that a CNCA exists is a meat and potatoe tick for Keytone’s pasteurised and fermented milk products as well as an infant formula line (should one already exist or should one be adopted for market sale). Let us not forget about Keytone’s ambition to gain organic certification of its manufacturing facility from NZ MPI towards the second quarter of 2018. Effective from mid 2017, the signing of an arrangement with China took place (Mutual Recognition Arrangement for Certified Organic Products) that will benefit the organic food industry for both countries was implemented to control the sale, import and export of organic ingredients. With an aim to align a business model with forever changing and growing political sentiment, every factor at play demonstrates to me that Keytone is at the Cornerstone of its game.
• The e-commerce platform has sparked further thinking as to whether the hype of Diagou market (a multi-million dollar trade channel of commerce between mainland Chinese buyers and overseas professional shoppers) would be considered as a distribution platform. When I had questioned James about the prospect of Keytone utilizing Aumake International (otherwise known as AU8, an ASX listed company that hit 4x in its first few months from inception in late 2017, which operates an online sales platform together with retail stores and a warehouse located in Australia, which sells Australian products to primarily Australian based daigou and Chinese tourist) as a retail distribution channel, James was reluctant to confirm whether this market would be tapped. He had diligently noted that Diagou is a very grey area. For safety, product integrity and quality assurance, Keytones product lines will always have health certifications whereas Diagou market has the capability to blemish this reputation and ruin branding. For a paramount concern to the CEO being product assurance and integrity at the forefront of sales and market domination, this to me marks a milestone of credibility.
• When James was questioned regarding the countdown for launch of Keytone milk products at Woolworth’s to be Australia wide or solely in New Zealand, his response provided me with questions but assurances. Keytone are currently restrained as a result of capacity to satisfy pending demand to follow with flagships like Woolworths despite having successfully passed the full scale production audit from Woolworths. With Keytone having recently acquired two new pieces of land being 11 May and 11 September 2017 (final building consent application lodged with Selwyn District Council on 26 January 2018 for approval of the construction of a new manufacturing facility), confidence is given to show an active ability to future proofing the Keytone business from any potential capacity constraints in the short to medium term while also contemplating further expansion of Keytone’s production capacity (projected increase of 233% over the existing production capacity). This will facilitate their KeyDairy powdered products to be produced in high-volume, for high-value customers, throughout Asia and in particular, China (via Alibaba, JD.com. U-then and Guangzhou Department and Friendship store). Many companies will buckle at the thought of a capital expense outlay for product manufacturing without a contracted demand. But Keytone has placed its money where its mouth is achieving the reversal of this sentiment, placing a capital expense to satisfy a confident demand to follow. For a moment just think of the sack it takes to make this commercial decision! Walk before you can run and I believe this sentiment is underpinned by robust commercial considerations to ensure continuity of supply without the possibility of falter.
• Alibaba being Chinas (and possibly the worlds) biggest and fastest growing e-commerce market (with over 713billion dollars in transactions as of 2017 and a revenue of 22.99 billion US) and JD.com being China’s largest online retailer an as well as the country’s biggest Internet company by revenue with over 266.3 million annual active customers, 405 warehouses and revenue in excess of USD37.5 billion. I should note that Keytone’s product exposure is currently limited on these platforms but I believe this exposure is countered by their Contract Packing win for U-Than and Product Launch into Guangzhou Department and Friendship store which will slowly but surely bolster their product display on these platforms to highlight the reach of the Keytone sales network in China and the demand for New Zealand branded dairy products in the Chinese market. I am confident that photo quality and nutritional content labelling is expected to improve in the future following listing and funding coming in from IPO.
• halal certification – the irony of calling this a “meat” and potato. Don’t try undermine the dominance of muslim population in western China and Japan. Many Chinese restaurants cater to Muslims with small Islamic restaurants or food stalls typically run by migrants from Western China. The breadth of halal certification should not be looked at in isolation but needs to be considered globally should Keytone attempt to penetrate other markets. Not paramount but certainly a win. I am curious whether it was a pre-requisite that their recent contract to supply Kobe beef farmers with new calf replacer of dairy based formula to Japan was founded on halal certification or not.

Not registered to provide investment advice and is simply providing an opinion. Information contained herein is not an offer or solicitation to buy, hold, or sell and security. All IMO and DYOR