ATP - Atlas Pearls

[mccollr]

Any thoughts on this stock. I have been following this company for sometime now and see that they have just taken over another Pearl Company.

rod

 

[trainspotter]

Re: ATP - Atlas South Sea Pearl

Having actually been to their pearl farm located at Penyambangan village, North Bali and viewed the hatchery as well as their operation I would say their ability to grow pearl is second to none in the practices they currently have implemented. The retail outlets that I viewed in Sanur and on site are very classy and professionally set out. I personally purchased golden 17mm perfet AAA rounds for my collection from Atlas and the service was second to none. I still receive Christmas cards and personal invitations to their "openings".

As for a stock I do not have any relevant information in regards to how well they are producing pearl (as in numbers), the outlets that they are supplying wholesale or retail or even a global strategy. Their pearls are grown on a bottom culture style over coral from seeding and not on string panels. This allows for a better quality pearl to be grown. The hatchery in place also has a very good success rate of spat which is critical for the supply of a pearl farm due to kill numbers.

Who the Directors are or what the future holds unfortunately I cannot offer any information. Not really followed the philosophy of the direction of the company but can advise the pearls they produce are of a very high quality with worlds best practice in play. Hope this helps.

 

[mccollr]

Re: ATP - Atlas South Sea Pearl

Really appreciate that report. Nothing beats being able to kick the tyres. Your information backs up the article in their latest newsletter. I was considering a long term investment and your information certainly helps.
Regards Rod

 

[trainspotter]

Re: ATP - Atlas South Sea Pearl

My pleasure Rod. Australias pearling industry has taken a dive since the GFC as well as Indonesia being able to produce such good quality South Sea Pearl (Pinctada Maxima) has not helped the likes of Paspaley and Linneys. Apparently dollar turnover has fallen from 250 million to 110 million and only employing 400 people down from over 1000 or so in the last 18 months.

Atlas has the advantage of very cheap labour and a friendly Govmint that has no restrictions or quotas on production. Water is pretty clean considering where they are located and even though the farm itself is pretty crude (not mechanically modernised) the pearls still keep coming. Maybe that is their secret?

I would jump in a plane and fly to Bali to check out their operation before spending my hard earned if it was me. Could be a tax deduction if you decide to invest?

At my pearl farm we are not growing the Maxima shell and do not have the volume of producing oysters as Atlas has achieved. But still obtaining good results thus far with lustre and nacre. SIZE is the issue !

 

[mccollr]

Re: ATP - Atlas South Sea Pearl

Wow that is amazing. Appreciate the photos as well. I will take your advice and pop over for a look. I think the stock would offer me a bit of diversity in my portfolio.

Regards rod

 

[oldblue]

Re: ATP - Atlas South Sea Pearl

Not wishing to pour too much cold water on ATP but bear in mind that the SP was around 50c three years ago and that it has essentially gone sideways for the last eighteen months.

Personally, I'd be looking for signs of an uptrend before investing.

 

[trainspotter]

Re: ATP - Atlas South Sea Pearl

Looking at their website they are claiming 8% return of the value of shares in 2007. Seeding results stop in 2006 as well. Not much data after that to really get a tangible grip on what they are actually offering? I notice in their 2009 annual report they also make this statement in regards to dividends?

http://www.atlassouthseapearl.com.au/PDF/annual/CRP01 AR 09 FINAL.pdf

Page 22 Section 7

7. DIVIDENDS
There were no dividends declared and paid by the Company during the financial year ended 31 December 2009. (2008: Interim dividend of 2 cents per share totalling $1,800,918 paid on 18 July 2008).

Page 28 also freaks me out a bit on the PL's with an 8 million dollar LOSS. Mainly contributed to "Other expenses" which seems to keep doubling every year?

Anyways ....... Like I said ... I have a producing pearl farm that is doing quite well thank you. PM me if you want some more details.

 

[piggybank]

A little while between posts...

AGM held at the end of last month - click on link to see.

http://stocknessmonster.com/news-item?S=ATP&E=ASX&N=659843

Up today (a real pearler) by just over 11% on the largest volume (daily) in nearly 4 years!!

 

[System]

On December 21st, 2017, Atlas Pearls and Perfumes Limited changed its name to Atlas Pearls Limited.

 

[greggles]

Saw this moving this morning due to yesterday's release of the June 2021 Quarterly Update and Appendix 4C.

Quarter Ended 30 June 2021

$8,345,000 Revenue
$4,335,000 Net Profit

Market Cap = $9 million.

Superficially, these numbers would seem to indicate the market has substantially undervalued ATP.

Thoughts?

 

[Beaches]

Costs seem fairly static, its a question of whether the sales numbers can be maintained, or whether June 21 was a one off.

Sales Income
Jun 20 $4.3mil
Sept 20 $1.6mil
Dec 20 $5.2mil
Mar 21 $3.0mil
Jun 21 $8.3mil

June 21 Report​

Atlas Pearls is pleased to announce a positive cashflow from operations for the quarter of $4.3m. ​

This signifies a positive outcome for Atlas and is the result of a range of strategic changes all coming ​

together. ​

Strategic changes include; ​

i) the introduction of the optimal 24-month cultivation period of the pearls, ​

ii) an increase in the harvest quality due to process improvements at the operations level, ​

in particular process improvements have been made at the time of seeding, and ​

iii) the establishment of a multifaced distribution network to diversify the customer base ​

and increase pricing tension. ​

​

July to September 2021 Outlook ​

Key items of note for July to September 2021 are: ​

• A 24-month harvest schedule will continue to be supported. The Company is expecting to ​

harvest 240,000 pearls in the quarter but only sell 50,000 pearls. This reflects the time delay ​

of bringing the harvests to market. ​

• The Company will remain focused on operational process improvements to ensure harvest ​

quality is maximised and on the diversification into different distribution networks. ​

• The online platform will continue to support the sale of pearls in a transparent and timely ​

way as they become available. ​

• Private sales will continue to maintain client relationships. ​

• The Company’s latest harvest from Alor is currently available online. ​

• The next online sales events are; ​

o Matched Goods auction mid August 2021, and ​

o Online auction 14-15 September 2021. ​

Share price has continued to run

 

[galumay]

A friend told me about this company a couple of months ago, I couldn't get any level of conviction about it, tough business, hugely capital intensive, very volatile market and too much debt. In the end I passed on this one.

 

[peter2]

Came across this one by accident (I think). Found the stock code in my cannabis list. (!)

ATP cultivates and sells pearls from their many bases in Indonesia. The company is selling more through their online sales that were established during Covid lockdowns. They've been surprised by the online market demand and are working to establish online sales that coincide with their cultivation cycles. This will ensure that the pearls are better quality and will attract bigger prices.

I don't expect that ATP will shoot the lights out in April but I'm hoping they'll continue higher and produce a winning month.

 

[The Triangle]

Very high operating cashflows have led these guys to pay off a considerable amount of debt in the past two years. In the most recent quarter they paid off another million+ in debt and I believe are now more or less debt free. However operating cashflow was only +$200k - Not great, but pearls are cyclical and last years Q1 was negative operating cashflow - so I see that as a significant improvement Q1 on Q1.

Considering the market cap is 11.5 million right now @ $0.027 SP with zero debt and they are turning a profit at about 1cps I feel like I'm missing something and need to do more research... When something looks too good to be true it usually is...

 

[galumay]

I did a fairly deep dive into it after a fellow investor spoke to me about it. Decided it wasn't for me. This is from the email I sent him,

I ran my ruler over ATP again after our chat the other day. As you say they have made great progress, moving to real profitability with decent FCF. I was also impressed with management’s capital allocation in using the cash generated to pay down the remaining debt. The business certainly looks really cheap on current financials. My first concern is just how sustainable those financials are and in reading the Annual Report in detail, particularly in the Explanatory Notes section, I was left feeling there was just too much uncertainty about this in the future.

Specifically its the risks associated with large biological assets on the balance sheet and the probabilistic gymnastics required to try and understand the range of outcomes. So we have disease risks, climate/weather risks, pricing risks, market risks, FX risks, discount rate risks, cost risks, just to name some that spring to mind. As the notes show, these variables can all have significant impact on the financials, specifically FCF. Each of them have the potential to impact outcomes that range from strongly negative to strongly positive. A lot of this is fundamental to agri/aquaculture as an industry, basically commodity traders with extra risks from biological assets,

For me a decision to invest is always built up from a consideration of how likely it is that I will lose capital and in a case like ATP I simply cant get a quantitive feeling for that risk and therefore although I think the price and current financials suggest a good opportunity for long term returns for a shareholder, it remains un-investible for me.

In the past I probably would have taken a small, speculative position just in case the bull thesis continued to play out, but as you correctly pointed out when we last spoke, a speculative position is simply gambling and I dont want to gamble. I have played that game in the past and I can’t think of a single time where it actually worked out for me. The only saving grace was I at least sized for risk and didn’t lose too much capital each time!

 

[Austwide]

Might be the low share turnover ($3300 ish) putting people off

 

[galumay]

The low turnover would attract me!

 

[The Triangle]

I did a fairly deep dive into it after a fellow investor spoke to me about it. Decided it wasn't for me. This is from the email I sent him,

If I strip out biological assets ($17.5m) the company has around $7m in net assets to $11.5m in market cap - which is not unreasonable in my opinion. Taking out revaluing of biological assets from the P&L statement and very roughly I get the red line below (I couldn't be bothered to correct for things like one-offs, etc.) Even 2.5m or so profit for last year is not too bad either. I'm seeing that they spend around $17.5m/year and so long as revenue is above that they should be ok.

However back to biological assets... I don't know much about oysters. No clue how often a crop/farm/fishery can be wiped out and I don't know much about the pearl industry either and pricing or competitors. Are they pillaging current oyster stocks and in X years time they're going to have an awful harvest? Are they reinvesting at an appropriate rate to increase growth? Can they increase growth or is/are pearls market saturated? These questions are all pretty simple, but it seems relatively difficult to get facts because pearl farming it's so niche.

I'll take another look when the next quarterly report/HY23 comes out. If they start paying a dividend, I'll lose interest. The company needs to build up a better cash balance first.

 

[frugal.rock]

I did a fairly deep dive into it

Pardon the pun but one doesn't have to deep dive any more, for pearls.

A very specialised industry, interesting to see it's a listed company.
Mist companies don't want spats, but for this one, the more spats the better, I guess.

Can you tell I'm bored...

 

[galumay]

If I strip out biological assets ($17.5m) the company has around $7m in net assets to $11.5m in market cap -.....

I wonder what they are worth really? A lot of that will be the commercial boats and barges to support the operations, may not be worth what they are on the balance sheet for? I also remember thinking the PP&E spend seemed stupidly low for such a capital intensive business, either the boats are clapped out, old local boats, or they are going to have a huge jump in CapEx sometime in the next few years.

As I said, most of what you need to know about the biological assets is in the notes to the financial reports, its sobering how many ways things can go wrong when you read thru it.

The TLR is simply too much downside risk.