STTCOMP CCF FA LONG
Carbon Conscious Limited
Share Price: 14.5c
Market Cap: $20m
A) Most Vertically Integrated Dairy Play on the ASX - read between the lines
have already taken out a dairy farm lease on very favourable terms ... almost too favourable, unless you read between the lines.
'' The dairy property “Capel Farm” is owned by Chinese interests associated with Green Lake, with those parties having invested in excess of $10 million into dairy production assets in Western Australia to date, in order to secure long term supply. The 330 hectare property comes equipped with a near new 60 stand rotary dairy, 600 ML water license and 2 pivot irrigation areas to support winter and summer production of silage. The 60 stand rotary has the capacity to support milking of up to 2,500 cows three times daily, 365 days per year.''
''Green Lake currently has distribution access through 150 minimart stores, but there are plans to open a chain of up to 300 retail stores featuring the milk brand Capel Farm.''
this is basically Green Lake (An Australian/Chinese giant with huge management credentials), creating a ''JV on paper'' in which it is running the supply side of its dairy through its Australian leg (to keep the China-desired ''Australian reputation'' within the milk) while simultaneously preparing a home brand (Capel Farm Milk) that will be distributed directly through its distribution channels and retail stores of its Chinese leg in China.
The JV is just on pen and paper, but really what we are seeing is a Chinese company, based in Australia, locking in Australian dairy supply while simultaneously locking in Chinese dairy demand - basically seeing the product through from the farming, to the branding, to the wholesale distribution, to the retail supply and to the consumers.
this is
by far the most vertically integrated dairy play I have seen, A2M would need to own its own stores in order to be as vertically integrated as this.
for me the writing is wall when they write in the announcement that they are going to label the milk ''Capel Farm Milk''..... hmmmm... so wait, Green Lake associated interests is offering CCF a 12 month free period on an already producing dairy farm in which they plan to then distribute and sell the product in 300 stores across China under a brand named after that same farm??
B) Other benefits of Chinese ties
having a Chinese partner as powerful Green Lake has other hidden benefits. Australian Dairy has been extremely lucrative in China the past couple of years, and there has been talks of the Chinese Govt. increasing tax or restrictions on Australian companies such as A2M and Bellamy's that are ''milking'' the dairy situation in China. Meanwhile CCF has partnered with a Chinese company, with Chinese ties, with Chinese connections that is based in China. CCF is the most immune dairy play on the ASX to any regulatory changes in China.
C) Already Earning Revenues
looking through the annual report now to see what CCF is worth
without dairy
they have consistent contracted revenue till 2027 of circa $32 million
current market cap: $19.8m
net profit 2014: $1.85m
net profit 2015: $90k ($1.8m of debt paid out)
debt remaining : circa $1.5m
basically it seems that going by its current pipeline of projects, CCF will pay out all debt with 1 more year of earnings, still be in profit this year and then have a locked in 10 year pipeline (2017-2027) of consistently being $1.9m in profit.
pretty stable investment to me , allowing for growth and considering the sector, this should be trading at $25m + just on its existing business.
2016....
the next big catalyst that will see the share price of CCF go berserk is the binding agreement of the MOU with Green Lake (expected in Q1 2016) - although Green Lake did not ''generously'' lease out Capel farm rent free, and are clearly working hand in hand with CCF to finalise a JV that will see both Green Lake and CCF benefit from the Australian farm to Chinese consumer business model that they have created.
I'm still shocked that this is the cheapest dairy play on the ASX - I would think given the announcements that we have at hand, that this is an obvious pick of the punch for the most potential upside.
