Sino Agro Food, Inc. is an agriculture technology and natural food holding company with principal operations in the People’s Republic of China. Together with Chinese co-investors, the Company acquires and maintains equity stakes in a cohesive portfolio of companies that SIAF forms according to its core mission to produce, distribute, market and sell natural, sustainable protein food and produce – primarily seafood and cattle – to the rapidly growing middle class in China. Company subsidiaries develop and distribute these high margin, high quality products as needed to meet the rising demand for fresh food of consistent quality and assured safety.
SIAF provides financial oversight and strategic direction for each company, and for the interoperation between companies. The Company owns or licenses patents, proprietary methods, and other intellectual properties in its areas of expertise. SIAF provides consulting and services to joint venture partners to construct and operate food businesses, primarily producing wholesale protein foods. Further joint ventures market and distribute the wholesale products as part of an overall “farm to table” concept and business strategy.
News and updates about Sino Agro Food, Inc., including key information, are published on the Company website (www.sinoagrofood.com) and the Company’s Facebook page (facebook.com/SinoAgroFoodInc). Investors may wish to view the Company’s News and Press Releases or SEC Filings.
The Company’s largest and most scalable businesses are its indoor seafood production farms and its cattle farms.
In aquaculture, the Company uses its proprietary high yielding Recirculating Aquaculture System (“RAS”) featuring indoor tanks with fresh water recirculating 60 to 120 times per hour, controlled feed and growth environments, and no use of hormones, antibiotics, or other drugs or chemicals. Its products grow to commercial sizes and are sold to established wholesalers and distributors.
At our cattle farms, live cattle is grazed on specified grasses grown with our proprietary fertilizers and methods; the cattle are raised and fattened using proprietary livestock feed (bulk and concentrate); then slaughtered at our abattoir, deboned and packaged, and sold through Company owned butcher shop concessions at Tesco PLC stores in China. Our meat and meat products are also sold to other well known third party wholesalers and distributors in China.
In a bull scenario SIAF manages to keep their high margins and a steady growth. Furthermore, the economic growth in China will be at rapid pace. Since 2009 SIAF have been growing, on average, at about 82% annually. This high growth has been part of SIAF’s 5-year growth plan initiated in 2010 in which SIAF used newly issued stocks to acquire majority parts of subsidiaries. The GDP growth in China has been at an annual rate of 8% for the last several years and is expected to stay at this level for the near future. With the continuing growth of the middle class from increases in income the demand for high quality food will also continue rise. This is especially true for high value products such as red meat, fish and seafood. At the same time the associated demand for rice, wheat and other grains will decrease. If SIAF is able to maintain its rapid growth from this emerging middle class while retaining the high margins they achieve from their competitive advantages we cannot foresee a problem for SIAF to have a revenue growth of about 50% on an annual basis from the year 2015 and returning to the 40% gross margin level of 2012.
The future growth of SIAF will be highly dependent on the economic growth in China and the decisions of policymakers. SIAF is also highly dependent on a few, but large customers. Failure of just one would have a big impact on their revenues. Furthermore, SIAF conducts their business in a nation known for its frequent and rapid change in its economy, laws, regulations and policies; all of which will have a great impact on SIAF’s results and operations. In a worst case scenario the policymakers in China would decide to stop supporting agriculture, the economic growth would decline, and one or more of their vital customers would go bankrupt, which stands for over 50% of the revenue. If the Chinese economy was to decline and SIAF loose a customer their revenue could drop as much as 50%. The resulting growth rate would then be negative in 2015 and negligible the years following owing from higher demand for rice, wheat and other grains.
Sino Agro Food (SIAF) – Highly Attractive Business Operating In A Highly Attractive Market. Analyst Group Initiates Coverage On Sino Agro Food At Strong Buy, Announces $4.96 PT.
Expansive company with historical growth of 82% annually
Since implementing their 5 year growth plan in 2009 SIAF have increased revenues by approximately 82% per year and are expected to have a revenue growth of 65% in 2014.
Operating in a highly attractive market with an expected growth of 24%
Poverty within China is declining and has resulted in an increased demand for high quality food. The majority of household income within China is spent on food and demand for beef is expected to grow by 24% over the coming years.
20-year project with an annual production capacity of 300 000 MT
The Zhongshan Prawn Project will be one of the biggest prawn farms in China with an end production of 300 000 MT per year. In its first two years of operations the project is expected to generate 150 million USD in revenues for SIAF.
Closed 25 million USD convertible note funding
On the 29th of August, 2014 SIAF closed a convertible note funding with Euro China Capital AB. The investment house performed two years of due diligence before investing in SIAF. As a caveat for this investment SIAF has agreed to stop the value destroying dilution of shares.
Upside of 439% at a target price of 4.96 USD
SIAF is currently trading at a forward looking P/E multiple of 0.73 and a forward looking EV/EBITDA of 0.80 for 2014. Compared to its peers with a P/E median of 15.50 and EV/EBITDA median of 7.13 the stock is trading at a high discount.