I’m starting this thread to have a serious discussion on the future earning power of PSD starting with phase 1a and what that means for the share price. Most of the numbers are readily available within various releases made by the company over the last 12 months. I’ll also be generous with my assumptions so what follows is my estimate of a best-case (realistic) scenario.
PSD Phase1a has a cost to completion of $281M and SFG claim to have already invested$120M getting to this point.Phase 1a will have 360 hectares available for production which will yield 5,976 Tpa. The sales price achieved can be expected to be $20/kg and the cost price $10/kg resulting in gross margin of $10/kg. Putting that all together results in revenue of $120M and gross margin of$60M p.a.
To get from gross margin to NPAT is a bit of a guess because one cannot use SFG’s existing operations since they do not separate PSD expenditure from ongoing operations.Rather than just pull a number out of the air let’s look at the numbers for another aquaculture company (Tassal). In their latest annual report they had Revenue = $553M, Cost of Goods Sold = $297M and NPAT = $130M i.e. earnings are about 50% of Gross Margin. When that same rate is applied to PSD Phase 1a, we get NPAT of $30M p.a.
Once tranche 2 and the SPP have concluded, there will be 4.3B implying a future EPS of .7c or PER of 8 at the current share price (Tassal is currently trading at PER of 8.5 [according to Nabtrade]). Earnings from phase 1a are at least 2 years away.
SFG still have an additional ~$180M to raise to complete phase 1a and this will either be via debt or equity or a mixture of both. To the extent that this is debt will put pressure on the NPAT estimate (e.g $180M at 8% would require $14M in interest payments), alternatively equity will lead to dilution and will thus lower the yield.
All IMO and DYOR
