SM1 Chart, page-2

Imo something is brewing!
I disagree (assuming you think the "brewing" is something positive).

At the recent AGM guidance remained firm - so nothing there to get people excited. There was a bit of new "news" and that was the expectation that revenue would double in 5 years - but that did nothing for the SP. The purchase of Dairy workers did pretty much nothing for the SP. All the news that could be interpreted as "good" or "positive" has not sparked a SP rally.

So we need to look at the two big unknowns. Firstly Pokeno - I think the market has built in what ever risk they see coming from the late April Supreme Court hearing - which is essentially very little. ( I don't think the market has properly built in the risk - but I accept the market is a lot bigger than me). So if the Supreme Court finds in favour of Synlait I dont there will be any big upwards move in SP. If the Supreme Court finds in favour of Mr Ye, and this subsequently impacts on Pokeno production then the "doubling revenue in five years" aim is going to be at risk - which will cause SP fall dramatically.

The other issue is the unknown uptake on the unsecured subordinated bonds. We don't know the rate nor the uptake. I'm going to assume the likes of FB will pump their unsuspecting clients money into it - so the bonds will be fully subscribed. I suspect the market knows this - and so already built into the SP. But if it isn't fully subscribed (or even if the extra $50m isnt taken up) the market may not take too kindly to this. So more down side than up.

SM1 have maxed out bank credit so there will be no more acquisitions in the near future. So no upside there.

There has been silence on Munchkin and no news on any new clients. So no upside there.


At best I see SM1 flatlining for a while yet.