According to submissions to parliament from the company, here is a quick summary of the vital statistics:
- 10,000 ha (the entire project) of production will require over $1.5bln of construction CAPEX over 7 years
- This will produce 125,000 tonnes of prawns per annum
- Expected sale price $10/kg
- When complete, the revenue will be $1.25 bln per annum
- Operating cash flow when complete $600 mln per annum
These numbers come from here
https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwip18Gs_5HWAhWIbbwKHRE1BVcQFgguMAE&url=http://www.aph.gov.au/DocumentStore.ashx?id=955c3ced-3326-4110-82cf-7d08456738a5&subId=253170&usg=AFQjCNGnTAWr7OGqV2GGanhdOBeb2oc3xQ
Other things we know:
- Phase one is 1080ha of grow-out, or roughly 10% of the project
- Phase one also includes the planning and development costs for the rest of the project, let's call that 20% of the CAPEX
- The company has a three-year option to buy Legune Station that expires in Feburary 2018 - the price for the station is not yet known, however it was last listed about $70mln in 2014
- In February 2015, the company estimated it would cost $21mln to reach this point - it's cost closer to $50mln, although the 21 month timeline is about right (available at http://seafarms.com.au/wp-content/uploads/2015/02/COZ-2014-AGM-Presentation-430.pdf)
- The company intends to own 70% of Project Sea Dragon, selling 30% to off-take partners
- Has about $25mln cash on hand
- Can expect about $12mln in new capital if everyone exercises their options at 10 cents
So, through the power of multiplication, we know the company needs:
- $70mln to buy Legune by February
- $300mln for phase 1 CAPEX over the next two years
- $1,200mln over the next five years after that
Optimistically we can expect phase one to:
- Cost $370 mln
- Provide $125 mln revenue when complete
- Provide $60 mln of free cash flow when complete
I see the likely capital structure for phase one:
- $50 mln in debt finance for phase 1, secured against the station itself
- $125 mln from off-take partners
- $200 mln equity raising from the big end of town
Let's assume 6 cents per share for that equity raising - that's 3.4bln shares issued, on top of the 1.4bln already issued
The company will then need to gear up to take on an additional $1,200 mln in debt to complete the project.
So, let's say, for round numbers when complete we have 70% of $600mln (the operating cash flow above) - that's 12 cents earnings per share at a PE of 12.5, a valuation of $1.50 per share makes sense.
