October 2018 - State of PSD

A few threads you should read - my last summary thread was called September 2018 - State of PSD (https://hotcopper.com.au/threads/september-2018-state-of-psd.4408157/). You may also want to read understanding the NAIF and PSD (https://hotcopper.com.au/threads/understanding-the-naif-and-psd.4403537/)

In September the company announced that it had started site-works, and that contractor visits for planning construction were underway now. This dove-tails quite nicely with the company's implicit acknowledgement in August that construction (as a reasonable person would consider the term) will start next year.

We've had another extension of the Legune option so that AAMIG can get their finance together. What's interesting here is that the 28 September announcement made it clear that the lease term sheet for the PSD site was between SFG and AAMIG, not Legune's current owners.

Points of concern:

• AAMI Group's financing for Legune Station - this is taking much longer than expected - we're starting to see capital rationing from the banks and that's a bit of a concern.
• "Construction" plan or budget hasn't been announced. We know that building can only occur in dry season which runs from April to November - a few drive ways and 'set down areas', while important aren't really "construction" of a prawn farm
• Cash - the company's results indicated that the company has a burn-rate of about $25 million per year with about $25 million cash on hand (after the NSK deal). We need about $300 million to do this thing, so construction financing is still an issue.
• SFG still hasn't made it's "final investment decision" announcement. Which means PSD is still in it's "bankable feasibility stage". Make of that what you will.

This is what I would expect to happen next:

• An announcement at some point this month that AAMI Group have secured funding and will be exercising the option on Legune Station, or yet another extension.
• "Construction" starts in September - but they will be basic site-works things - there was discussion of a "hard set down area" made of compacted crushed gravel.
• A bunch of funding is found over the next year, construction proper happens in the dry season of 2019 and 2020 (April to November)
• Prawns grow in 2021There is some kind of issue with yield in 2021 (guess - but something always goes wrong somewhere)Phase 2 starts circa 2025.

In my circumstances I remain a hold (I've very overweight SFG). If I were coming into the market, I'd likely be a spec-buy. GLTA, DYOR.