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SFG Share price jump. Massive potential, page-11

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AngryPrawn

709 Posts.

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12/08/18

22:05

Post #: 34887075
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Originally posted by Bonnie73 ↑

Thanks AP
I think your scenarios are very helpful to understand the amount of cash PSD can potentially generate, and how seemingly undervalued the shares are at current levels. Your numbers should hold up if they can access borrowed funds for the build. My (and the market's) issue is understanding how the bank's will lend that amount of money without significant equity input, at least 50%. I am not part of the finance world, but would think that if you wander into CBA business loans asking for $400 mill to build your prawn farm they are going to want some assets to guarantee the loan against. SFG's only current assets (Qld operations = SHPL and SQPL) are already guaranteeing their loan from Avatar finance.

There is an interesting page 22 in the EGM presentation from 16th July, talking about finance - this suggests that they are hoping to get significant funding from NAIF, and notes that "changes to NAIF's mandate strengthens it's capacity and flexibility to provide finance to projects like PSD as well as removing the 50% debt cap limitation." This would indicate that they are going to try and borrow more than 50%, but no doubt some equity will be required. Even if only $100 million initial equity is sought for stage 1, which would seem to be a minimum, then if they can retain 70% of the PSD company this values it at $330mill, and SFG at north of $400 mill including Qld operations, or 25c per share. At current SP lets say 12c, then they would presumably be at less than 50% equity in PSD, which is less palatable.

If NAIF won't play at all, and then needing to rely on commercial loans, I think $200 mill equity may be required, and the interest rate might be quite high to account for no security to cover the loan.

This is why I think that its very hard to value SFG until those numbers are known. If NAIF come through with low interest loan and not too much equity required, then all AP's spread sheets come very much into play and the SP will fly.

If there are any investment bankers reading this, I would be very interested in your thoughts - not my world, but just trying to be realistic here.

Expand

I agree wholeheartedly- Finance is the risk, but now there are three major things in the company has in its favour: 1. Trainer is a rich-lister whose Arles business keeps making cash - he would be in a position to lend more money if need be for preference shares, same true for NSK - Billionaires don’t let their assets become worthless if they can help it; 2. the Andrew Robb investment fund is sniffing around SFG, 3. We still have 85% of potential off-take to underwrite.

Yeah Finance is a risk, but all the rights to build PSD are worth something - even if SFG sells off the project and winds up I think we’d be quids in

SFG Price at posting: 11.5¢ Sentiment: Hold Disclosure: Held
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