SFG - Seafarms Group

[Chronos-Plutus]

Yep, similar with TGR, usually when you look through them, they report EBIDTA that is multiples of Cash Flow, it just never gets to the bottom line and CapEx is the main reason. Its not a pretty sector for investors!

Generally speaking; I think we all need to be vigilant when analysing financial statements. Many creative accountants will shift operating cash flow into the investing cash flow bucket; so the EBITDA looks good in the income statement and it is reflected in the operating cash flows; but really the operating costs are hidden in the investing cash flows. Not saying this is the case with SFG because I haven't reviewed the financial statements; but I have noticed that it does happen.

 

[Garpal Gumnut]

It would appear the salmon have gone up the wrong river to spawn and are acomin back down again.

I have always found commercial sea fishermen to be the salt of the earth, and not without a few skills in making a quid.

 

[greggles]

SFG was holding fairly steady for almost eight months between late October 2020 and late June 2021, range trading between 8c and 10c. Then management decided to raise $92.5 million via a placement at 5.5c... when SFG was trading at 8.7c.

As can be expected, the share price immediately plummeted following the announcement. I don't hold SFG but if I was a shareholder I would be pretty frustrated by a capital raising at such a huge discount to the prevailing share price. I suspect they needed to offer the placement shares at such a large discount to get the CR fully subscribed.

The $92.5 million will be used to start construction on Project Sea Dragon in the Northern Territory. It is interesting to note that the capital raising was underpinned by largest shareholder and Seafarms Chairman, Mr Ian Trahar, who subscribed for $20 million under the placement and agreed to convert all loans approximating $15.2 million to equity on the same terms as the placement. That's an extraordinary financial commitment by one person to a company.

Anyway, with the share price currently at 5.4c, I will watch with interest as Project Sea Dragon finally starts becoming a reality.

 

[barney]

Anyway, with the share price currently at 5.4c, I will watch with interest as Project Sea Dragon finally starts becoming a reality.

Thanks for the heads up Greg

Know nothing about SFG .... but assuming the business is a viable operation

The relative Share Price: Cash on hand: Market Cap ratio would have to be looking very attractive to "punters"

Not straight to the pool room, but definitely straight to the watch list

 

[So_Cynical]

I suspect they needed to offer the placement shares at such a large discount to get the CR fully subscribed.

The $92.5 million will be used to start construction on Project Sea Dragon in the Northern Territory.

Sea Dragon is a massive project and they needed to find the money somewhere, i have always considered Seafarms
to be the equivalent of a prospective miner with a large ore deposit but no money to pay for the mine and infrastructure.

 

[greggles]

Sea Dragon is a massive project and they needed to find the money somewhere, i have always considered Seafarms
to be the equivalent of a prospective miner with a large ore deposit but no money to pay for the mine and infrastructure.

That's an interesting way to look at it. My view has always been if they can pull Project Sea Dragon off, and it produces the amount of seafood that they are hoping it can, I don't see how they can lose. You'll never go broke producing food, especially something that is in high demand like seafood. As long as you can run a lean operation and do it profitably.

The reality is that farmed seafood is the way of the future because we are over-fishing the oceans. The challenge is making it as profitable as possible while producing the best possible product for export markets.

There's a little voice in the back of my head telling me that the 5c mark might be a great long term entry point for SFG... if they can pull Project Sea Dragon off.

 

[So_Cynical]

There's a little voice in the back of my head telling me that the 5c mark might be a great long term entry point for SFG... if they can pull Project Sea Dragon off.

The 92 Million cap raising basically guarantees that they can make a very large start on Sea Dragon, 92 million should see them producing something from the project, pretty low risk entry at this point i would think.

 

[barney]

There's a little voice in the back of my head telling me that the 5c mark might be a great long term entry point for SFG... if they can pull Project Sea Dragon off.

pretty low risk entry at this point i would think.

Very much the way it appeared to me as well gents. I think the "market" will also see the potential and the SP should react accordingly.

 

[greggles]

There's a little voice in the back of my head telling me that the 5c mark might be a great long term entry point for SFG... if they can pull Project Sea Dragon off.

SFG have stumbled badly and Project Sea Dragon is now under review by the company. It doesn't sound good.

Seafarms Group Limited (ASX: SFG) (Seafarms) announced today that newly appointed Executive Chairman Mick McMahon has initiated a review of Project Sea Dragon (PSD) which is expected to take several months.

As recently announced PSD Construction is underway and arrangements for debt and equity funding for the project were being addressed. It is now not considered feasible to finalise debt and equity funding arrangements before the end of the calendar year and this delay in funding arrangements will consequently lead to delays in the project schedule, while noting that planned wet season construction activity was limited in any event.

Mr McMahon said “Given these circumstances we will undertake a Project Review to consider impacts on the project schedule and overall economics, in order to be best placed to complete funding requirements in the new year.”

Reading between the lines, it seems that serious questions now surround the economic viability of PSD. I never took a position in SFG, but felt they had some potential long term. All of that is now under a cloud of uncertainty as we head into 2022. Very disappointing.

 

[greggles]

I got SFG completely wrong. The lack of communication from management regarding the future of PSD (and the company itself) has been very disappointing.

A great idea that has seemingly gone nowhere with millions squandered. A $600 million dollar market cap three and a half years ago reduced to $100 million market cap today.

 

[divs4ever]

have always had an aversion to aquaculture ( especially in saltwater/open-sea ) in my opinion too many things can go wrong

but these businesses struggling brings me no joy

you need a BIG ( potential ) upside to be playing here ( IMO)

 

[Dona Ferentes]

and another 40% drop today. Make the close at 1.5c ....

THe Sea Dragon project was "not viable in its current form".

Seafarms said the review identified a "number of challenges, as well as opportunities to de-risk the project" and the key finding was the need to "pilot and prove up" the ability to successfully farm prawns at Legune.

It said the project in its current form would "not generate acceptable financial returns" and involved "unacceptable risk" such as biosecurity, environmental conditions, remoteness, and grow-out ponds that were "unproven in Australia".

 

[sptrawler]

The future of one of the world’s largest proposed prawn farms is in doubt after Seafarms Group called in voluntary administrators for the $1.5bn Northern Australian project.

 

[greggles]

Very sad outcome. I never invested in SFG but I followed the company for a number of years because I was interested in aquaculture and also because I thought the export market for high quality seafood was only going to grow, especially given our proximity to Asia and the gradual depletion of natural seafood stocks in oceans due to overfishing.

But SFG just couldn't make Project Sea Dragon work. And the failure of Project Sea Dragon might just lead to the failure of SFG.

 

[galumay]

Thats how it looks to me, the NT project is a massive capital intensive investment and its not a clear path to profit by any means.

.....

I think there is much better places to invest capital.

From 3 years ago, I take no pleasure in being correct about this. It would have been wonderful to see an aquaculture project of this scale succeed in the NT. Just such a tough industry.

 

[houtman]

"Never invest in anything that eats or needs painting"

There has been plenty attempts at aquaculture in Australia, it's a tough gig.
I've seen a few private attempts fail, the numbers look great but it just doesn't work out that often.

Lots of capital and a wait period for harvest all while the ocean tries to reclaim your infrastructure.

Then you only need one calamity and you are back to Go, like white spot in the prawns a few years ago.

It's a shame but not surprising.

 

[Garpal Gumnut]

This outfit went in to liquidation today.

gg