2. Wellard is still profitable so Net tangible asset will increase year by year.
3. Share price is at lower stage and may keeping at lower stage for a while. ($0.4-$0.8 range)
4. When the Chinese start buying the price will go up, China has built too many quarantine facilities and abattoirs for the available supply of cattle from Australia,At least four companies are in the process of building 100,000-250,000 cattle per year size facilities (cost from A$60M to A$150M) along China's east coast, while a further 30 are preparing to "launch projects",and that's before it secured any supply contracts in Australia.
5. Only one of them Wellao ( JV of fulida and Wellard) signed supply contract with Wellard in March of 2016.
6. Australia is only country approved for live export to China.
7. These processors are now faced with the uncomfortable choice of either allowing new plants to remain idle, or buying expensive cattle from Australia.
8. Other competitors do not own vessel and some exporters surrender long term shipping contract charters coming up for renewal. Several long term charter agreements between exoports and ship owner have recently expired and will not be renewed by exporters. They will return to chartering their requirements on spot- basis, which is more expensive per shipment and reduces sheduling certainy. (Source: http://www.beefcentral.com/live-export/live-export-prices-rise-as-supply-tightens/)
9. Most of competitors then will only use around 3,000 capacity on spot basis charter vessel to transport cattle to China which is inefficiency and cannot march huge demand in China. Currently 4 feedlots and abattoirs is nearly completion to receive 100,000 to 250,000 Australia cattle annually. It needs to take 16 days from Australia to China and each shipment may takes 40 days. So, Ocean Shearer (20,000 capacity) , Drover (20,000 capacity) and Klepie (10,000 capacity) is most efficiency to operate Australia to China cattle sea route.
10. Some of China cattle import company may want cooperate with Wellard and some want to buy Wellard shares or even pay a good price for takeover. Because wellard is largest export company in Australia and get more than 30% market shares (Totally export 450,000 cattle in last FY, 18% from South American which is 370,000 cattle export from Australia. Australia total export cattle between 1-1.2M so market share will between 30.8% to 37%).
11. Only wellard has ability to transport large amount of cattle in short of time. As demand is quit high, 1M cattle per year means around 83,000 cattle each month only for China market, which competitor have capacity to reach demand for China market?
12. It needs to take 2-3 years and spend around A$80M to A$150M to build a new purpose live export vessel. But only need to pay $0.61 per share and totally 244M plus around 200M debt to get 5-6 vessel, 65,000 tones per year feeds manufacture factory, 2,500 sheep capacity per day processing abattoir, 5-7 pre export quarantine, 30% market share of live export business in Australia, South American(Brazil,Uruguay, Colombia) live export business, New Zealand live cattle business and 50% of JV Wellao (direct feed and slaughter cattle and sell beef in China).
So, if some company in China want to takeover wellard, price they offer will definitely larger than $0.61 otherwise WHG will not accept takeover offer.
WLD Price at posting:
43.0¢ Sentiment: Buy Disclosure: Held
