SML - Synlait Milk Ltd

[bull....]

share price might jump biggly after a yes vote ? make rights issue price much higher tham most people think

[Bikeguy]

Bright and A2M would choose the next move to maximize their benefits. Selling assets at a discount might not be a good choice for them. Building the Pokeno plant was expensive and challenging. Why would Bright want to sell Pokeno when it has access to capital at interest rates lower than small shareholders could expect?

Intelligent points

[Bikeguy]

SB888, that trade at .20 has paid off big time mate, well done!!

[Charlie]

I bought in at .24 and very happy too . 5% of my holdings so didnt want to risk any more.

[bull....]

if this jumps to a dollar ? ( hopefully after vote , wishing hard ) make a massive difference to money needed for raise.

[whatsup]

.28 open and .41 high so far for the day, fortune favours the brave !! well done all

[Balance]

SB888, that trade at .20 has paid off big time mate, well done!!

Well done indeed!

He who dares wins!

[Toddy]

Yes, well done guys. Way braver than me taking on the big boys in town.

[Balance]

Answer from Chairman to question about size of CR - "hundreds of millions of dollars."

Sounding like $200m to $250m to me.

[Balance]

Loan proposal approved - clear from meeting.

Proxy votes - 59m or 27% in favour so A2M would have been defeated anyway if it voted against the loan.

235,000 shares against the proposal.

[Newman]

Answer from Chairman to question about size of CR - "hundreds of millions of dollars."

Sounding like $200m to $250m to me.

The capital raising would be large enough to pay back bonds, further reduce bank debt, retain farmers, enhance Pokeno productivity, and produce a good after-tax profit to please shareholders.

Could a CR of $250-300m and a share price return to $1 before Christmas be expected?

[Toddy]

The capital raising would be large enough to pay back bonds, further reduce bank debt, retain farmers, enhance Pokeno productivity, and produce a good after-tax profit to please shareholders.

Could a CR of $250-300m and a share price return to $1 before Christmas be expected?

Yeah sure, if they raised 218m off current shareholders that's a buck a share into the bucket.

[silverblizzard888]

Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.

Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.

Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.

Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.

Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.

[whatsup]

With a M C of circa $60 mil and $250,000,000 funding to raise ?

[silverblizzard888]

With a M C of circa $60 mil and $250,000,000 funding to raise ?

The Chair did say they will be raising several times their market cap, so yes it looks like the case. If the share price is higher by end of August then less dilution.

[bull....]

Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.

Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.

Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.

Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.

Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.

you were right when you said a while back at just over 20c that liquidation value was worth more than current price. probably still case now. so agree probably good value still with uncertainty significantly reducing.

[Toddy]

So what kind of carrot are they offering farmers to stay or sign up.

The farmers will be a big winner out of today's cap raising announcement for sure.

[silverblizzard888]

So what kind of carrot are they offering farmers to stay or sign up.

The farmers will be a big winner out of today's cap raising announcement for sure.

Can’t remember precisely but the farmers wanted upfront payment incentives and synlait promising competitive milk pricing to fonterra

[nztx]

So what kind of carrot are they offering farmers to stay or sign up.

The farmers will be a big winner out of today's cap raising announcement for sure.


Will they ? So who is left digging repeated holes in their front garden for CR after CR ?

Any news on a future dividend out of this or do the Chinese lenders get first lick of the lollypop right up the top of the queue .. or maybe better dodging the mayhem ahead in future rounds of craziness .. by simply leaving funds in the bank on high interest ? :)

[RupertBear]

Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.

Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.

Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.

Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.

Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.

I was also very impressed with the Chairs performance.

[Toddy]

Will they ? So who is left digging repeated holes in their front garden for CR after CR ?

Any news on a future dividend out of this or do the Chinese lenders get first lick of the lollypop right up the top of the queue .. or maybe better dodging the mayhem ahead in future rounds of craziness .. by simply leaving funds in the bank on high interest ? :)

Farmers will win for sure.
Chinese will win.
A2, secure short term product.

Retail investors need to find big $$$ to keep the faith.

I ways wonder where Kiwi mum and dad's are getting this money from. It's no IFT cap raise for sure. This is a rescue package, think RYM, FBU etc

[Snoopy]

I was also very impressed with the Chairs performance.


Four legs at the start of the performance and four legs at the end. Not bad, although in fairness that kind of performance is expected these days. What about the person who was sitting in the chair? How did he do?

SNOOPY

[Balance]

Farmers will win for sure.
Chinese will win.
A2, secure short term product.

Retail investors need to find big $$$ to keep the faith.

I ways wonder where Kiwi mum and dad's are getting this money from. It's no IFT cap raise for sure. This is a rescue package, think RYM, FBU etc

Synlait will go on from here to recover and prosper - that is my belief.

Covid dealt a very cruel blow to any number of companies and sadly, some did not survived.

Think of the number of NZ companies which needed to do CR in the last 3 years to survive. And how they have gone on to recover and do well.

Synlait is going to survive - it is fortunate to have a major shareholder with deep pockets, commitment and distribution in a huge market in China which wants dairy products from NZ.

[nztx]

Synlait will go on from here to recover and prosper - that is my belief.

Covid dealt a very cruel blow to any number of companies and sadly, some did not survived.

Think of the number of NZ companies which needed to do CR in the last 3 years to survive. And how they have gone on to recover and do well.

Synlait is going to survive - it is fortunate to have a major shareholder with deep pockets, commitment and distribution in a huge market in China which wants dairy products from NZ.


Another A2M upwards trajectory .. headed off in direction of a big 20 .. or maybe not so soon ? :)

[RupertBear]

Four legs at the start of the performance and four legs at the end. Not bad, although in fairness that kind of performance is expected these days. What about the person who was sitting in the chair? How did he do?

SNOOPY

Ok it took me a while Snoopy but I finally got it! :lol:

So to be more precise, I thought George Adams, the man in the chair, was excellent. :)

[Balance]

Ok it took me a while Snoopy but I finally got it! :lol:

So to be more precise, I thought George Adams, the man in the chair, was excellent. :)

Agreed. Given that the approval was in the bag (proxy votes), I thought he was patient, frank and as forthcoming as could be with all the questions throw at him. Best in mind that he is new as chairman but comes across as very well briefed.

One hopes that Synlait will achieve the cashflow positive outcome in 2025 he alerted to.

[Toddy]

Forbar say RYM 300 percent returns. Makes you think, puting even MORE money in to Synlait would probably be a slow painful wait to earn a decent return on your capital.

I understand that this waiting game on the outcome of this rescue package has been fun for many. But the opportunity cost of reinventing will be massive in this downward interest rate environment. The fund managers will find it a hard sell to the story to invest more funds to the big boss.

[Balance]

Forbar say RYM 300 percent returns. Makes you think, puting even MORE money in to Synlait would probably be a slow painful wait to earn a decent return on your capital.

I understand that this waiting game on the outcome of this rescue package has been fun for many. But the opportunity cost of reinventing will be massive in this downward interest rate environment. The fund managers will find it a hard sell to the story to invest more funds to the big boss.

The issue with Synlait going forward is not whether its fortunes will recover - it will imo. The factors which brought this company close to receivership (but for Bright) are now well known and imo, reversible.

The big issue for me is whether the interests of minorities are in synch with that of Bright who is expected to increase its shareholding beyond its current level. Bright controlling Synlait at an operational level raises the all important question of where Synlait’s future profits exporting to the huge China market will reside - in NZ or in China via ‘transfer pricing’.

Bright is not rescuing Synlait for free!

So shareholders and potential investors need to watch that carefully before putting in more funds via the CR.

Different for those who are currently not invested - as can be seen in recent times, brave & shrewd investors like ssb888 can double their monies by buying off the panic-stricken investors.

[bull....]

Adams said the company could now get on with a capital raising through the sale of new shares, which was likely to be "several hundred million dollars" but would avoid the need to sell assets. Details would be released next month, but the matter was complicated and needed to be fair to all.
"We have a complex relationship with two major shareholders, which we've got to resolve to ensure we can deliver an equity raise ... we've also got to take into account the volatility of our share price and bond price."

https://www.rnz.co.nz/news/business/521906/synlait-milk-shareholders-back-large-loan-from-chinese-major-shareholder

[silverblizzard888]

In my view Bright probably sees their investment in Synlait as a means of growing their business into foreign markets that would otherwise be harder to enter themselves, so they would to that extent never really want to fully own Synlait as theres benefits for it to remain NZX listed and to maintain local shareholders. Hence why they have backed Synlait even though they never fully utilised Synlait for their benefit, though they are now working on a new product together that will see Synlait potentially producing a lot more product for them.

Synlait has always been a growth aspired company hence why maintaining Pokeno was so important to them even though it has nearly taken them under. If they make it through this with a successful capital raising they become a whole lot stronger and have a lot of potential to become a much better company than they have been in the past. I like the stance of the new Chair, he seems to have all four feet on the ground (pun intended), a more traditional finance guy who doesn't run before he walks and the perfect guy to help reset the A2 relationship.

[Mel]

Hopefully, Adams and the team can quickly address the exclusivity dispute with A2M in the near future also (secondary priority) as that's the other fly in the ointment. I was impressed with his pragmatism, so hopefully that leads to some good outcomes.

[silverblizzard888]

Adams said the company could now get on with a capital raising through the sale of new shares, which was likely to be "several hundred million dollars" but would avoid the need to sell assets. Details would be released next month, but the matter was complicated and needed to be fair to all.
"We have a complex relationship with two major shareholders, which we've got to resolve to ensure we can deliver an equity raise ... we've also got to take into account the volatility of our share price and bond price."

https://www.rnz.co.nz/news/business/521906/synlait-milk-shareholders-back-large-loan-from-chinese-major-shareholder


The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote

[Mel]

The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote
Their share price is quite volatile, so 'several' times market cap could be a 'few' or otherwise!

[bull....]

The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote

if its several hundred milliuon fits in with my thinking earlier in the thread of a billion odd shares need issued in the raise, but of course if the price rises more this reduces as the issue price would be higher. in the scheme of things its really not important as there financial position after raise is what matters. so bigger the better. both a2 and bright got plenty of coin.

[whatsup]

I cannot understand why anyone is buying SML shares atm when one could buy the rights at what imo will be a massive fire sale !

[silverblizzard888]

if its several hundred milliuon fits in with my thinking earlier in the thread of a billion odd shares need issued in the raise, but of course if the price rises more this reduces as the issue price would be higher. in the scheme of things its really not important as there financial position after raise is what matters. so bigger the better. both a2 and bright got plenty of coin.

The bigger the raise the better the company will be to put this debt issue behind them, but of course the dilution will be big and harsh, though if the CR is too small then it risk this debt issue coming back to bite them again.

$300-400m raise would put to bed any issue of debt and all steam ahead for growth
$200-300m raise is an optimal raise for company and shareholders, to reduce debt to a comfortable level and focus on getting back to cashflow positive and paying down debt
$100-200m raise would not likely be enough to reduce debt and would look to North Island asset sales.

[clearasmud]

I cannot understand why anyone is buying SML shares atm when one could buy the rights at what imo will be a massive fire sale !

Because you get the rights for free.

[whatsup]

Because you get the rights for free.

Im talking about new S Hers !

[bull....]

i just find it hard to see how they can survive

with 585m debt


based on there ebit forecast of 45 - 60m that would imply they could have only round 300m debt which they could service on those ebit figures
so that implies a cap raise of say 300m and issue of at least 2.5 billion shares :scared: at say 12c
probably need to raise more for a buffer if conditions dont improve

prob only want 200m debt at most and hope the issue price is higher than 12c

[bull....]

hopefully the cap raise allows participates to oversubscribe there current holdings . that suit bright and some others

[blackcap]

Because you get the rights for free.

I think you are right. You get the rights attached to your shares. If the rights issue is done at say 20 cents and the SP is trading at 30 cents, the rights will have a value of about 10 cents. It all depends on the future prospects at the end of the day as to how well the SP will hold up.

[clearasmud]

I think you are right. You get the rights attached to your shares. If the rights issue is done at say 20 cents and the SP is trading at 30 cents, the rights will have a value of about 10 cents. It all depends on the future prospects at the end of the day as to how well the SP will hold up.

Yes if you buy shares now the rights are worth quite a bit as your share purchase now will only be a fraction of your Total investment.
NTA of the shares now must be about $2.50 to give you an idea.

[whatsup]

Yes if you buy shares now the rights are worth quite a bit as your share purchase now will only be a fraction of your Total investment.
NTA of the shares now must be about $2.50 to give you an idea.

You really think so with all of the problems that they have out there, biggest one imo is farmer supply issue, where is their future with the farmer suppliers bailing out of their supply contracts, talk about stranded assets !!!

[Balance]

You really think so with all of the problems that they have out there, biggest one imo is farmer supply issue, where is their future with the farmer suppliers bailing out of their supply contracts, talk about stranded assets !!!

Farmers are well known for their loyalty to processor .... NOT!

Whoever pays the most and is perceived as reliable payers get the produce.

[silverblizzard888]

Interview with a Synlait supplier, but nothing new said. Supplier was supportive, main concern is certainty for the future.

https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/cameron-henderson-synlait-supplier-on-the-companys-shareholders-voting-in-favour-of-a-130m-loan/

[Toddy]

Farmers are well known for their loyalty to processor .... NOT!

Whoever pays the most and is perceived as reliable payers get the produce.

Yes, it's called business. It's no different from mum and dad's shopping around electricity providers for a good deal.

And Fonterra will match the offer for certain customers, just like your bank matching another banks discounted mortgage rate.

[silverblizzard888]

Yes, it's called business. It's no different from mum and dad's shopping around electricity providers for a good deal.

And Fonterra will match the offer for certain customers, just like your bank matching another banks discounted mortgage rate.

Mind you Fonterra also expects its suppliers to stump on money in the hundreds of thousands or even millions for shares in Fonterra to match how much they supply, for the farmers without the extra capital its a bit of a stretch, so its not a straight forward swap.

[Toddy]

Mind you Fonterra also expects its suppliers to stump on money in the hundreds of thousands or even millions for shares in Fonterra to match how much they supply, for the farmers without the extra capital its a bit of a stretch, so its not a straight forward swap.

Yes, deal structures can take on many forms like part payments for investment capital. Farmers dont mind as long as they are earning a return on the capital. Also the processors don't like to have too many stretched farmers on their books as that can lead to many other issues.

Having my capital tied up in the Kiwifruit shares (Zespri and Eastpack) is definitely not ideal. But as long as they beat the cost of capital and it secures my pack out then I don't mind.
And the banks are allowed to include Zespri shares as a capital asset for lending purposes.

[Balance]

Shareholders really should be turning their attention to influencing the CR terms and conditions so that it's a fair CR to all shareholders.

Forgone conclusion that the CR will be dilutary but it does not have to be unfair to other shareholders.

Remember that a shareholders' vote is required to approve the CR so there's one more hurdle Synlait has to clear before the CR goes ahead and Synlait is recapitalised.