Hey Black Cap. I’m not quite clever enough to calc the balance sheet, with potential sales of assets vs debt repayments etc. care to share any workings?
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Hey Black Cap. I’m not quite clever enough to calc the balance sheet, with potential sales of assets vs debt repayments etc. care to share any workings?
Just one bad year? I am not even sure they could call themselves currently an ongoing concern ...
I guess their problem is that they have a lot of terribly performing equity (which makes you wonder, whether they can realize the value they put against it in the balance sheet). Market seems to wonder.
Anyway - banks want their money back - you might want to check, how long they recently extended their credit line, and so far it doesn't looks like it is easy to find a buyer for Talbot cheese and Dairyworks - both already for ages on the market. If they don't sell, things might get interesting soon (not just) for bond holders.
Big issue for Synlait is that they had only one pony earning them the keeps (A2 Platinum), and that one is now laming on two of its feet: Chinese market caving in and on top of that A2 Milk gave them notice on their exclusive production rights. Currently in mediation and could go any way.
Synlait made as well a lot of expensive investments during their high growth years which are now underutilised given thatq the growth is gone - and not returning their capital. Whether they can sell their two additional fabs in the North Island and, if yes, for the amount they paid for when they had been keen to expand - is anybodys best guess ... they clearly need to find a buyer happy to pay big dollars in a fire sell.
Obviously - they may or may not be lucky, but I can see why the market prices the bonds that low ...
Good luck.
i buy the dairyworks orange cheese for our homemade beef burgers. Rawz family doing their bit to help this struggling company :cool:
Thanks Rawz, I appreciate that.
BP, I understand what you are saying. The SP does seem to suggest they are a going concern. The auditors have not seen fit to challenge the asset side of the business.
If they go under, the plant and machinery should still be worth 40% of book value?
Not sure but I do understand the uncertainty.
Last 4 years:
NPAT $74m, -$29m, $38.5m, -$14.1m
Op cF $103m, $15m, $233m, $39m
Revenue: Steady
Current ratio: Above or near 1
Debt Equity: 1.46, 1.11, 1.11, 1.13
Does not look like a company about to go under.
Look - as I said, I wish you the best of luck, and I don't know either.
One of the things which would make me nervous with this company is that the (near) majority shareholders (Bright Dairy) might have quite different interests to retail shareholders. While I am pretty sure that they are interested in the facilities as part of the feed China strategy, nobody knows whether it is in their best interest to maintain the current company structure. It might be much cheaper for them to allow them to go bankrupt and buy the assets on the cheap from the liquidator.
Doubt they would have lots of competition - A2M has already their own factories (and as well Chinese shareholders) - and who else would want to buy a not particularly profitable milk production plant during an economic crisis?
So - I guess, while I am sure that the facilities will somehow survive, I am not quite sure whether the beneficiaries will be the current bond and shareholders.
Anyway - I might be just too neurotic ... but I suppose that's what impacts both bond and shareprices. If you just look at NTA (and beleive in it), than the SML share (not just the bonds) is currently a steal.
So - I guess this is exactly what it looks - high risk, high gain (if it works out) ... and I don't like these games if other players have more information that I do. Both Bright Dairy as well as A2M do - and I would not eat my hat that they are going to play fair.
Summarised from the AFR.
Bids for Dairyworks due last week. Several AU private equity groups put in bids, however failed to meet the Company's expectations (advised by Jarden, same as Sky....). Sources say still likely to be acquired by a smaller trade player like Bega who "swerved" the auction. Then a bunch of stuff about balance sheet being a concern, and if sale delayed could a capital raise cant be ruled out.
* someone probably needs to remind Synlait they are the ultimate price taker, not price maker.
There is an article on businessdesk.co.nz https://businessdesk.co.nz/article/p...paign=nzh-home (paywalled) commenting on a Forsyth Barr report speculating whether a2 Milk will make a bid for Synlait's Dunsandel plant.
The reports conclusion; if a2 wants to bring more infant formula in-house buying Dunsandel makes better sense than ramping up Mataura.
It tries to guess the value of Dunsandels China licenses. In my opinion this is a problematic exercise given the uncertain macro economic situation in China and the wobbly twiddling with economic levers such as licenses typical of command economies.
Forsyth Barr wonders if Bright Dairy will become a white night to protect its stake in Synlait. My take is this is unlikely as the ultimate owner of Bright, the Shanghai Municipality will be feeling the pinch.
It is Synlait's AGM today so more information may become available latter.
Boop boop de do
Marilyn