Perhaps this is something that the AHF Board is indeed considering given the organic comments made in the presentation but again it is something on which relevant detail is lacking. Certainly, something is being considered from an organics perspective. That said, it is not unusual for JV arrangements to include various pre-emptive rights' provisions, including valuation mechanisms, etc.
Given that the presentation referenced the JV, it arguably follows that ODFA has not exercised any rights to either exit the arrangements or take them over, etc. AHF's presentation comments are therefore curious in suggesting a strategic focus on organics going forward.
With the ODFA JV this could well involve taking the arrangements to a higher, more formal level, but in doing so, this likely would involve a level of capital commitment which would require tapping institutional investors, etc for the funding. Perhaps, then, this was one reason why the institutional presentation, etc was issued in February.
Having said this, 4 issues abound, all of which require the Company to do something going forward:
* They've settled the acquisition, but not once have they explained what the benefits of the acquisition will be. They have, in words, but not in facts or figures. It's time then for the financials to be updated and forward projections /estimates to be advised.
* We are currently waiting on the 3rd quarter operational results which will likely provide the strongest indicator yet of the farm acquisitions performing on a stand alone, pre-CDC, basis.
* For an emerging small-cap (sub-$50M capitalisation entity), the current ownership structure is more likely to complicate, hinder or hold back the Group in going forward. That is, it is potentially cumbersome rather than nimble. Certainly, it lends itself to future opportunities, shifts in strategic direction, etc, but if this is going to be done one farm at a time, or 1-2 farms only a year, then the present structure is potentially unwieldly in terms of what is being sought. less time then on the financial engineering and more time spent on the building of critical mass would therefore not go astray.
* Just as announcements are meant to inform rather than confuse and are best served by an intermixing of narrative, graphics /graphs /charts, pictures and $/c (financials), so too with the structures in place. Make it all too complicated for the average investor to understand, then such investors will likely invest elsewhere. However, make it more like what the institutional investors find intriguing, but then sub-optimise the ongoing share price performance, and such investors will not roll up enmass to participate (at least, not yet).
Certainly, AHF is moving towards critical mass but it is doing so in a strange tortured way which is neither fitting presently into the investment timelines of the sophisticated /institutional investor, nor the investing timelines of the retail investor.
If therefore they continue swaggering in this way, then they do indeed risk being considered sub-optimal in terms of forward SP movements, and with that comes the low ball risk of being taken out in an aggregation play by others. So, rather than being the aggregator, leader, acquirer, or market setter themselves, they could well risk being eaten up by others.
So, what's going on?
Likely, many things, but few of which they can yet really talk about. So, instead of putting out a presentation that arguably covered a world of opportunities, they should have come up first with a financial update. This they haven't yet done so because it is due tomorrow (ie: the Q3 operational performance/update) .
So, they will get it done, but arguably in the wrong order (ie: CDC closure /what it is first, financial update 2nd, and strategic update 3rd). But instead, they tried to mash together both the CDC closure /what is CDC with the strategic update, whilst leaving everyone waiting on the financial update. As a result, they have confused things a bit, leaving in the wake a number of unanswered questions. And with this, pricing drift has subsequently occurred.
On 28/12, the SP was 14c. Now, it is at 22.5c which effectively means that the market is valuing the CDC acquisition (including its current $25M revenue proposition and $4-6M+ underlying EBIT proposition, set @50% utilisation) at $1.5M.
Equally, with the SP at 22.5c, effectively, they Heywood farm acquisition has been valued at $nil by the market.
Such pricing outcomes often occur because the market, in being spooked by other factors arising elsewhere (MGC, China, etc), will typically take a "one size fits all" approach to everything whilst also steering clear of any stock that sounds just a bit too complicated, or complex as to structure, outlook, intent, or achievement. This then is what AHF is presently suffering from - pricing drift in a setting where the market is finding it hard to actually understand either the structures, the metrics or the financials.
No point therefore in talking about unitholders when you have an incorporated, listed entity with a stapled property trust in toe. It smacks of too much sophistication for a listed small cap at a time when the market is screaming (across the board) for clarity, certainty, transparency and uncluttered /de-leveraged complexity.
AHF should now start getting on the front foot and to do this, it should start talking about exactly what the financial prospects of the business are. Or, if not, then they should bring in those who can do this, as well as run the business.
The opportunities are clearly there. The potential is clearly there. And within the next 12-18 months, this company could well be a $40M-$50M+ revenue sized company (still with spare CDC capacity), generating 20-25% margins at the EBIT level. But for all the clutter , for all the silence, and for all the chatter going on elsewhere, no-one (without carefully examining any of this) would even remotely know this. Especially not out there in MARKET LAND.
As for the basis of some of the figures referred to above, look back to my earlier positing of 8/2/16:
Post #:
16969921
As has been said before, the Board needs to stop thinking and acting solely as bankers, and start now acting as businessmen and company journeymen. They are now in the business of making, processing and selling milk in all its myriad of forms. No longer are they solely in business as bankers. And presently, they really are doing themselves no favours by allowing the share price to drift as this indeed is removing from them one of the most potential measures of future, effective capital management (ie: using scrip to acquire and expand, etc).
